An Analysis On The Rationality Of Transfer Pricing Of Hanbo Company

Since reform and opening to the outside world, foreign investment enterprises and foreign companies have developed very fast in China. In order to realize the maximum of profit, transfer pricing is normally considered as the important operational strategy target of the affiliated enterprises within the multinational enterprises group, and through the convenient conditions of pricing within the group to realize profit transfer which will lead to tax avoidance, which means by using the different tax policy in different areas in the world, the profit will flow from the high tax area to low tax area through purchasing and selling products between affiliated enterprises in order to realize the profit maximization of the whole group.This thesis is started with the basic problems of the affiliated enterprises and transfer pricing of foreign invested company Hanbo then used actual examples to analyze the principles of affiliated enterprise's transfer pricing as well as introduced and analyzed the main transfer pricing methods which are comparable uncontrolled price method, resale price method, Add-to-cost Method, comparable profit method, transactional profit methods, profit- split method and the theory of transfer pricing reasonability. Through the internal and external operational characteristic of the enterprise and analyzing financial data to decide the suitable method for Hanbo Company in regards of pricing. Then use the comprehensive comparable analysis method to demonstrate it with the enterprises which has similar internal and external operation as Hanbo Company. By analyzing the historical data above three years and use quartile area to define the profit rate comparison between the company with reasonable profit and Hanbo Company in order to further explain and demonstrate the reasonability of Hanbo's transfer pricing.