The price at which goods and services are moved between subsidiary companies in a multinational organisation is referred to as transfer pricing.
By using transfer pricing, it is possible to determine the costs of goods and services that are exchanged between affiliates, subsidiaries, or companies having a shared controlling stake in a bigger corporation. Transfer pricing may result in corporate tax benefits, albeit tax authorities may contest these claims.
Transfer pricing accounting is utilised when goods or services are moved between divisions of the same company. A transfer price is computed using market rates when charging another division, subsidiary, or holding company for services rendered.
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