An Overview about Transfer Pricing Practices

Multinational Corporations (MNCs) use transfer pricing practices to reduce taxable profit with a view to recommend how such practices could be minimized, to enhance the tax revenues of their host countries. The various MNCs take advantage of different tax rates charged in different jurisdictions to minimize the groups' tax liabilities. Using transfer pricing practices to shift profit from high-tax jurisdictions to low-tax jurisdictions. Multinational corporations as integrated entities exploit international differentials and generate integration economies by setting transfer prices that are unlikely to be the same prices arms length parties would negotiate. Tax authorities should be aware of the need to publish documentations requirements concerning transfer pricing, so as to improve on monitoring of MNCs transfer pricing compliance. Transfer pricing must be provided to tax authorities for computation of both border, and corporate income taxes. This is necessary since the activities of MNCs cut across national borders.