Multinational Intermediate Products Based On The Tax Rate Factors, The Transfer Pricing Method

The multinational companies expand with global economy development. By the way of inner transfer pricing, they transfer the profits of subsidiaries to lower transaction cost and income tax to gain their superiority in trade. Inner transfer pricing, as a important part of multinational companies trades, is attracting more and more attention in the world wide .The major study of inner transfer pricing method is mostly carried out in developed countries. Domestic researches is more focused on qualitative analysis, but most of them is based on the tax-free assumption, the analysis of transfer pricing method that take tax into consideration is of some value of research. This paper aims to research into the theory and method of how subsidiaries use the tax rate tool in inner products transfer pricing under the tax-avoidance impulse , with the hope that it can be used as a reference of how to set an appropriate transfer price for inner product for our multinational company.The research is carried out in following ways:1. When import and export duties of subsidiaries are determined by specific unit taxation, the scenario of two or more than two subsidiaries are being analysed in terms of tax avoidance, and come to the conclusion what strategy should be used to price inner products of multinational company.2. When import and export duties of subsidiaries are determined by tax ad valorem, the scenario of how should multinational company price their inner products to maximize the after-tax profits.3. The linear programming is used to analysed the existence and corresponding necessary conditions of technology transfer pricing after-tax profits multinational company. The optimal strategy of technology transfer pricing is deduced from two-step pricing method in consideration of tax rate.4. In consideration of external output competition in multinational companies , we analyse how to set the optimal transfer price in terms of tax-avoidance. And we come to the conclusion that if import and export duties of subsidiaries are determined by specific unit taxation, multinational company should opt different transfer pricing strategy when they consider whether to hide their inner transfer price or not.