Research On Transfer Pricing Of Company A

With the development of economic globalization,the cross-border investment of large groups is increasing,and the cross-border transactions among the group enterprises are also frequent.Due to different tax rates in different countries and areas,some multinational corporations try to make their profits more reserved in countries with lower tax rates by controlling transfer pricing of related party transactions within the groups.However,this method will damage the interests of trading areas,and thus,tax authorities forbid the method Tax authorities also strengthen investigations of transfer pricing in multinational corporations.Under this background,from the perspective of enterprises,it is necessary to verify their own transfer pricing is reasonable in order to reduce queries on intra-group transactions from tax authorities.Utilizing proper transfer pricing method to prove transfer pricing is not suspected of tax avoidance can reduce the risk of tax audits and avoid disruptions on operations due to tax investigations.This paper applies the existing transfer pricing theories and methods to choose appropriate method and prove Company A transfer pricing rationality.First of all,this paper describes the environment of company A,the transfer pricing is drawing more and more attention with the development of global economic integration.Secondly,it introduces the basic theories of transfer pricing,introducing the meaning of related transactions and transfer pricing,arm's length principle,five transfer pricing methods and quartile method.Then the paper introduces basic situation of Company A and related transactions in 2016,and points out the inapplicability of the transfer pricing method originally adopted by Company A.According to the situation of company A,the paper chooses the most appropriate transfer pricing method for company A,and applies the method.After the function and risk analysis,based on the applicability of the five transfer pricing methods,transactional net margin method is chosen.After selecting seven comparable companies,by calculating the net cost plus margin of Company A and comparable companies,the net cost plus margin of Company A is higher than that of inter-quartile range of net cost plus ratios established by the comparable companies.Therefore;the transfer pricing of Company A is reasonable.