TP
Transfer Pricing
Short definition
Transfer pricing tests related-party prices for goods, services, licences and finance against arm’s length. A gap shifts the tax base and can create double tax or penalties.
Detailed explanation
Documentation, comparables and method (CUP, cost-plus, TNMM and so on) are jurisdictional. Cash pooling, guarantees and IP are the most examined items.
Management “group margin” need not equal the legal tax base. Pricing also meets customs and VAT.
Why it matters for the CFO
Intra-group finance and royalties quietly move ETR and cash tax; an audit year creates a cash and provision shock.
How to read it
The arm’s-length range is not a single price. A crisis year can invalidate historic comparables; the defence file must stay current.
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What to learn next
Definitions are educational. They are not investment, credit or tax advice.