Transfer pricing refers to the rules and methods for pricing transactions within and between enterprises under common ownership or control. Because of the potential for cross-border controlled transactions to distort taxable income, tax authorities in many countries can adjust intragroup transfer prices that differ from what would have been charged by unrelated enterprises dealing at arm’s length.
Transfer pricing, the pricing of goods and services exchanged between affiliated entities within multinational corporations, has significant implications for global marketing strategy.
‘The transfer price is the intemal value placed on a raw material, good, or
service as it moves from one related organizational entity to another within a
consolidated corporate group’ – Cravens, (1997).
Further open academic reading on Transfer Pricing
Cravens, K. S. (1997). Examining the role of transfer pricing as a strategy for multinational firms. International Business Review, 6(2), 127-145.