Summary of the transfer pricing rules

By Tolley
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The following Corporation Tax guidance note by Tolley provides comprehensive and up to date tax information covering:

  • Summary of the transfer pricing rules
  • What is transfer pricing?
  • Who do the transfer pricing rules apply to?
  • Transfer pricing: capital allowances and capital gains
  • Articles relating to transfer pricing

What is transfer pricing Transfer pricing is the prices at which an enterprise transfers either physical goods intangible property or services including financing arrangements to associated enterprises Generally enterprises are associated if there is direct or indirect control by one of the enterprises of the other or they are under common control For these purposes direct control means the ability to determine how the affairs of the company are conducted by virtue of the shareholding voting rights or any powers within the articles of association or other document regulating the company or any other company Determining whether indirect control exists depends on including rights and powers which are available in the future or which are held by other persons TIOPA 2010 s 148 Transfer prices are important because in large part they determine the taxable profits of associated enterprises in different tax jurisdictions Different tax authorities seek to ensure that the amount of taxable profit of an enterprise in their jurisdiction represents the appropriate amount of profit and that multinational enterprises do not transfer profit to low tax territories to minimise their tax liability Most tax authorities therefore require transfer prices between associated enterprises to be at an arm s length price that is equivalent to the price that would have been charged between independent parties in the same circumstances The UK transfer pricing rules require an adjustment of profits for tax purposes where a transaction between associated persons is not undertaken at arm s length and has created a potential UK tax advantage This could mean an increase in income or

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