Imagine a big company with offices in many countries. Transfer pricing is how they set prices when selling things between their different offices. It's like deciding how much one part of the company should charge another part.
It's important because taxes are different in each country. Companies try to pay the least amount of taxes legally. Tax rules are strict to make sure companies don't cheat!
Governments watch closely to make sure the prices are fair.
- Big companies sell things between their own offices in different countries.
- They need to set fair prices to avoid paying extra taxes.
- Governments check to make sure everything is fair.
| Example | Details |
|---|---|
| US company sells software to its office in Ireland. | If the US charges less than the market price, they could get in trouble for tax avoidance. |
