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Describe ways in which related parties could be transfer pricing systems to avoid tax

      

Describe ways in which related parties could be transfer pricing systems to avoid tax

  

Answers


Wilfred
- Undercharge for services rendered to another related party in order to minimise revenue for tax purposes. This would be most applicable in a situation where the firm providing the service is in a high tax rate country.
- Acquire goods at a mark-up, rather than at cost, from a related party. This would mainly apply where the party receiving goods wishes to overstate its purchases and thus reduce the profit.
- A related party entity may sell goods to another related party at below market rates in order to minimise sales, reduce revenue and thus avoid taxes such as value added tax, turnover tax or corporation tax
Wilfykil answered the question on February 25, 2019 at 11:48


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