Transfer price is the price that related parties charge each other. This is like the price at which different departments charge each other based on their services.
Transfer pricing is very important in a company which has different departments under one roof. Transfer pricing is very useful in the purpose of tax. It helps saves the company from paying a lot of money in tax to the government. And you can understand more of this through the transfer pricing services singapore.
This type of pricing exploits the loophole in the tax system in different countries hence a company aims to register more profits in countries that have a lower tax rate. The importance of transfer pricing to a company is as follows.
Transfer pricing helps the company save on the money paid to government in the form of tax. The company is able to execute it through transferring the products’ value to an organisation or a smaller department of the company working within a country with lower tax rates.
The company stands to make many profits by the end of the financial year if they use transfer pricing. They can do this by shifting profits from one jurisdiction to another.
Transfer pricing also lets a business prevent double taxation from occurring.
Transfer pricing also helps in promoting the spirit of competition among various divisions in the company because they know that about the costs that they are incurring and revenues they are producing.
Transfer pricing is important in that it helps come up with a fair price when a transaction takes place between to different departments.
Transfer pricing has its benefits and also its disadvantages. Companies that use it well will benefit in profits. It can also be misused by other companies and used in tax evasion. You also need to learn more about the gst ask Singapore.