Presentation on “Transfer Pricing”

1. Presentation on “Transfer Pricing” www.AssignmentPoint.com

2. Prepared By: www.AssignmentPoint.com

3. Presented By: • Md. Eamin Zabed ID. 09510082 • Mahamuda Islam ID 09410097 • Sharmila Rani Das ID 09410092 • Md. Shalahuddin ID 09410004 • Farhana Yeasmin Lopa ID 09510189 • Shaon Bhowmik ID 09410007 • Md. Shafiqul Islam ID 09410089 www.AssignmentPoint.com

4. What is “Transfer Pricing” www.AssignmentPoint.com

5. Transfer pricingrefers to the -setting, -analysis, -documentation, -and adjustment of charges made between related parties for goods, services, or use of property (including intangible property). www.AssignmentPoint.com

6. OECD Transfer Pricing Guidelines state, “Transfer prices are significant for both taxpayers and tax administrations because they determine in large part the income and expenses, and therefore taxable profits, of associated enterprises in different tax jurisdictions.” www.AssignmentPoint.com

7. Economic Theory www.AssignmentPoint.com

8. Figure: Transfer Pricing with No External Market www.AssignmentPoint.com

9. Figure: Transfer Pricing with a Competitive External Market www.AssignmentPoint.com

10. Figure: Transfer Pricing with an Imperfect External Market www.AssignmentPoint.com

11. History: Transfer pricing adjustments have been a feature of many tax systems since the 1930s. Both the U.S. and the Organization for Economic Cooperation and Development (OECD, of which the U.S. and most major industrial countries are members) had some guidelines by 1979. The United States led the development of detailed, comprehensive transfer pricing guidelines with a White Paper in 1988 and proposals in 1990-1992, which ultimately became regulations in 1994. www.AssignmentPoint.com

12. History: In 1995, the OECD issued the first draft of current guidelines, which it expanded in 1996 and 1996. The two sets of guidelines are broadly similar and contain certain principles followed by many countries. www.AssignmentPoint.com

13. Government authority to adjust prices Most governments have granted authorization to their tax authorities to adjust prices charged between related parties. www.AssignmentPoint.com

14. Many such authorizations, including those of the United States, United Kingdom, Canada, and Germany, allow domestic as well as international adjustments. www.AssignmentPoint.com

15. Arm's length standard Nearly all systems require that prices be tested using an "arm's length" standard. Under this approach, a price is considered appropriate if it is within a range of prices that would be charged by independent parties dealing at arm's length. www.AssignmentPoint.com

16. This is generally defined as a price that an independent buyer would pay an independent seller for an identical item under identical terms and conditions, where neither is under any compulsion to act. www.AssignmentPoint.com

17. Comparability • Nature of property or services Comparability is best achieved where identical items are compared. For example, gold prices might be adjusted based on the weight of the actual gold (one ounce of 10 carat gold would be half the price of one ounce of 20 carat gold). www.AssignmentPoint.com

18. Functions and risks Buyers and sellers may perform different functions related to the exchange and undertake different risks. For example, a seller of a machine may or may not provide a warranty. www.AssignmentPoint.com

19. Among the functions and risks that may impact prices are: • Product development, • Manufacturing and assembly, • Marketing and advertising, • Transportation and warehousing, • Credit risk, • Product obsolescence risk, • Market and entrepreneurial risks, • Collection risk, • Financial and currency risks, • Company- or industry-specific items. www.AssignmentPoint.com

20. Terms of sale Manner and terms of sale may have a material impact on price. For example, buyers will pay more if they can defer payment and buy in smaller quantities. www.AssignmentPoint.com

21. Market level, economic conditions and geography Goods, services, or property may be provided to different levels of buyers or users: producer to wholesaler, wholesaler to wholesaler, wholesaler to retailer, or for ultimate consumption. Market conditions, and thus prices, vary greatly at these levels. In addition, prices may vary greatly between different economies or geographies. www.AssignmentPoint.com

22. For example, a head of cauliflower at a retail market will command a vastly different price in unelectrified rural India than in Tokyo. www.AssignmentPoint.com

23. Types of Transactions Sale of goods, Provision of services, License of intangibles, Use of money, Use of tangible property. www.AssignmentPoint.com

24. Methods • Transactional Methods Comparable uncontrolled price method, Resale price method, Cost-plus method. • Transactional Profit Methods Profit-split method, Transactional net margin method, Comparable profit method. www.AssignmentPoint.com

25. Unconventional methods Advanced Pricing Agreement, Global Formulary Apportionment Method. www.AssignmentPoint.com

26. Challenges in Transfer Pricing Issues • Both corporate tax policy and double taxation treaties affect the countries’ transfer pricing regulations. • Bangladesh’s transfer pricing regulations should be appropriate to the conditions of the country. www.AssignmentPoint.com

27. Challenges in Transfer Pricing Issues • The authorities should require the transnational corporations to make reasonable efforts to determine the transfer pricing in accordance with the arm’s length principle, etc. www.AssignmentPoint.com

28. ? Thank You Have Any www.AssignmentPoint.com