Reference no: EM133168689

Question - Multinational corporations use transfer pricing as a method of allocating profits (earnings before interest and taxes) among their various subsidiaries within the organization. Transfer pricing strategies offer many advantages for a company from a taxation perspective, although regulatory authorities often frown upon the manipulation of transfer prices to avoid taxes. Effective but legal transfer pricing takes advantage of different tax regimes in different countries by raising transfer prices for goods and services produces in countries with lower tax rates. (Corporate Finance Institute, 2015)

Required -

(a) Critically discuss THREE (3) methods that commonly used for establishing transfer pricing in cross-border transactions.

(b) Discuss TWO (2) objectives to consider in determining international transfer pricing.

(c) Explain briefly FOUR (4) risks associated with international transfer pricing.