IslamicFinance.de

Transfer pricing sounds esoteric and many wrongly associate it with abusive behaviour by multinational corporations. In reality, all multinational corporations have to deal with transfer pricing. Profits made in different countries may suffer different amounts of corporate tax and may suffer different amounts of withholding taxes before those profits can be paid. The tax authorities of each individual country understandably seek to maximise that country’s tax revenues. The serious risk that the multinational group faces is that the tax authorities impose artificial prices for tax purposes. This can cause the underlying profits to be taxed twice. Fortunately, a growing number of countries have entered into tax treaties to solve this problem.