Intrafirm trade, taxation and transfer pricing: evidence from French data

An important share of international exchanges take place within multinational firms, according to internal transfer prices. These prices can be influenced by cross-country differences in corporate taxation. A multinational group can reduce its global fiscal burden through overpricing of goods moving from low-tax to hight tax-countries. Several studies confirm such an influence, most of them on American data. This paper aims at providing insights about the French case, characterized by a relatively high level of corporate taxation. The empirical analysis is based on a survey which provides micro-data on the intra-firm trade of French affiliates of multinational firms and therefore enables to investigate to which extent international differences in company taxation influence the pricing of intra-firm transactions. Our main result indicates that a statutory corporate income tax rate in the foreign country one percentage point higher is associated with an (standardized) intra-firm trade balance relative to this country that is almost two percentage points higher.transfer pricing, corporate income tax, intra-firm trade, multinational firms

The problematics of transfer pricing in Czech and International tax law

Problematika převodních cen v českém a mezinárodním daňovém právu Postupná globalizace vede k rozmachu obchodně a majetkově sdružených společností, které nazýváme nadnárodní. Nadnárodní společnosti provádějí v rámci jejich skupiny společností tzv. vnitropodnikové transakce, a to za odlišných podmínek než by prováděly v běžném obchodním styku. Tyto transakce nazýváme závislé, protože jsou prováděny mezi spojenými osobami v prostředí, které není konkurenční, ale spřízněné. Problematika převodních cen je obvykle spojována s daňovou optimalizací, protože za pomoci těchto transakcí jsou nadnárodní společnosti schopny docílit nižší daňové zátěži. Agresivní daňové optimalizaci brání řádné nastavení převodních cen vnitropodnikových transakcí. Převodní ceny vnitropodnikových transakcí jsou nastaveny řádně, pokud jsou v souladu s principem tržního odstupu, který se svým způsobem snaží simulovat konkurenční prostředí. Cílem této práce je nastínit úpravu převodních cen v českém a mezinárodním daňovém právu a analyzovat problémy této úpravy. V českém právním řádu jsou převodní ceny upraveny zejména v Zákoně o daních z příjmu a v nezávazných pokynech Ministerstva financí, které se ve velké míře odvolávají na mezinárodní úpravu. Na mezinárodní úrovni se převodním cenám věnuje především Organizace pro...The problematics of transfer pricing in Czech and International tax law Constant globalization leads to the boom of business and property-related companies, which we call multinational. Multinational companies carry out so-called intra-company transactions within their group of companies under different conditions than they would in normal business. We call these transactions dependent, because they are carried out between affiliates, in an environment that is not competitive but related. Transfer pricing issues are usually associated with tax optimization because, with the help of these transactions, multinationals are able to achieve a lower tax burden. Aggressive tax optimization prevents proper transfer pricing for intra-company transactions. Transfer pricing of intra-company transactions is set up properly if they are in line with the arm length's principle, which in its own way attempts to simulate a competitive environment. The aim of this work is to outline the regulation of transfer pricing in Czech and International tax law and to analyse the problems of the regulation. In Czech law, the transfer pricing is mainly regulated in the Income Tax Act and in the non-binding instructions of the Ministry of Finance, which rely heavily on international regulation. At international level, the...Department of Financial Law and FinancesKatedra finančního práva a finanční vědyFaculty of LawPrávnická fakult

The accounting for transfer pricing and profit shifting in multinational companies: the case of Egypt

There has been much discussion in the literature concerning the potential conflict over transfer pricing techniques used by MNCs to shift profits outside the borders of a host country. This happens whereby MNCs artificially lower their profits by manipulating transfer prices with their subsidiaries. They can achieve substantial benefits by adopting effective pricing policies. Careful planning of intra-company prices can take full advantages of differences among such things as corporation tax rates, tax incentives and reliefs and customs duties. The decade of the 1970s produced important economic changes in the Egyptian economy as a result of the economic open door policy. Since then Foreign Direct Investment (FDI) grew rapidly which reflects confidence in the Egyptian economy. Despite initiatives undertaken by the Egyptian government to attract greater inflows of FDI, greater efforts should be devoted to streamline and simplify the relevant administrative procedures of the government. Governmental policies and regulations could encourage multinationals to engage in transfer pricing manipulation more often in developing countries than in more developed countries. This is rarely due to the ignorance of the governments of developing countries to transfer pricing issues at the international level. Also, authorities concerned with the the issue are poorly equipped. The purpose of this study has been to investigate transfer pricing and profit shifting practices by MNCs doing business in Egypt. The case study approach has been used in the empirical work, including eleven companies. The investigation involved governmental authorities and an accounting firm that has an interest in the transfer pricing issue. The empirical study focused on factors influencing transfer pricing strategies which represent a motive to shift more profits from Egypt

TRANSFER PRICES: MECHANISMS, METHODS AND INTERNATIONAL APPROACHES

Transfer prices are considered the prices paid for the goods or services in a cross-border transaction between affiliates companies, often significant reduced or increased in order to avoid the higher imposing rates from one jurisdiction. Presently, over 60% of cross-border transfers are represented by intra-group transfers. The paper presents the variety of methods and mechanisms used by the companies to transfer the funds from one tax jurisdiction to another in order to avoid over taxation.transfer pricing, intra-firm transaction, tax jurisdiction

Preços de transferência : o caso prático da CIN Portugal

Este trabalho tem por base o estágio realizado no Departamento Financeiro da empresa CIN Portugal, S.A., com vista à conclusão do Mestrado em Finanças da Faculdade de Economia e Gestão da Universidade Católica Portuguesa. Numa primeira fase é feito um enquadramento dos preços de transferência no contexto prático da CIN ao nível das operações vinculadas, das funções desempenhadas e do método e indicador utilizado no seu cálculo com o objetivo de perceber a origem da temática e a importância que esta desempenha no contexto internacional da CIN. A segunda fase será dividida em duas partes: 1. Quais os benefícios dos preços de transferência na estrutura operacional da CIN e quais os motivos para a existência de diferenças no controlo dos mesmos; 2. Qual a relação entre matérias-primas, preços de transferência e preço final no caso particular entre a CIN Portugal e a Barnices Valentine, empresa sediada em Espanha com maior peso na transferência de produtos intra grupo. O principal objetivo deste trabalho é averiguar se variações nas matérias-primas estão na base das diferenças detetadas entre as vendas reais intra grupo e a política seguida pela empresa ao nível dos preços de transferência.This work is based on the internship that was accomplished in the financial department of the company CIN Portugal, S.A., with the purpose of concluding my Master’s degree in Finance by the Economics and Management School of the Catholic University. Initially, there is a framework of the transfer pricing in the real context of the company. This framework is linked to the level of operations, functions performed and the method and indicator used in its calculation in order to understand the origin of the theme and the importance it plays in the international context of CIN Portugal, S.A. The second phase is divided in two parts: 1. What are the benefits of transfer pricing in the operational structure of CIN Portugal and the reasons for the existence of differences in its control; 2. The relationship between raw material, transfer pricing and final price in the particular case between CIN Portugal and Barnices Valentine company of the group with more weight on intra group transferred products. The main goal of this work is to determine if variations in raw materials can explain the differences detected between actual sales and the intra group policy followed by the company in terms of transfer pricing

RELATED PARTY TRANSACTIONS - OVERVIEW

The purpose of the present investigation is to provide a short overview of themain implications arising from carrying related parties transactions: accounting reporting(related party disclosures - IAS 24), auditing (audit procedures for related partytransactions), taxation (issues regarding the transfer prices used for intra-grouptransactions). Although this research does not identify a problem with the scope to solve ithowever the utility might be observed by its contribution to the future developments, byproviding premises for forthcoming studies in the ‘related party transactions‘ field.Related party transactions, related party disclosures, transfer pricing

Management control in the transfer pricing tax compliant multinational enterprise

This paper studies the impact of transfer pricing tax compliance on management control system (MCS) design and use within one multinational enterprise (MNE) which employed the same transfer prices for tax compliance and internal management purposes. Our analysis shows immediate effects of tax compliance on the design of organising controls with subsequent effects on planning, evaluating and rewarding controls which reveal a more coercive use of the MCS overall. We argue that modifications to the MCS cannot be understood without an appreciation of the MNEs’ fiscal transfer pricing compliance process

Transfer Pricing – a Fiscal Issue

Lately a frequently used practice to reduce fiscal costs is the commercial transactios of products between subsidiaries of multi-national entities depending on their actual purposes or strategic objectives. In this context an important role in policy’s of such companies have methods available for pricing transfer. Even a relatively late entrant into economical practice, transfer pricing has rapidly emerged because more than a half of global transactions are conducted through multinational companies. In this paper we intend to present some of the situations where use transfer pricing, the consequences of their practice and their fixing methods on the basis of the strategic objectives of companies.transfer pricing, profitability, tax