ECONOMICS

Detailed explanation-1: -The Organisation for Economic Co-operation and Development (OECD) outlines five main transfer pricing methods that MNEs and tax administrations can use. We explore the five methods, giving examples for each, to help organizations decide which is most appropriate for their needs.

Detailed explanation-2: -Transfer Pricing was introduced through inserting Section(s) 92A-F and relevant Rule(s) 10A-E of the Income Tax Rules 1962. It ensures that the transaction between ‘related’ parties is at a price that would be comparable if the transaction was occurring between unrelated parties.

Detailed explanation-3: -Transfer prices are the amounts charged during intercompany transactions between related companies. It is the price paid for goods or services that are transferred from one unit of an organisation to its other units in different states or countries.

Detailed explanation-4: -The five different methods of transfer pricing fall into two categories: traditional transaction methods and transactional profit methods. While the traditional transaction methods look at individual transactions, the transactional profit methods look at the company’s profits as a whole.