Transfera pricinga allowsa largea companies/organizaonsa toa transfera protsa outa ofa onea companya anda
intoa aa taxa havena country.a Thea IRSa isa alloweda toa contesta thea claimsa ofa thesea organizaons.a IRCa 482a
allowsa thea IRSa toa adjusta income,a credits,a anda deducons.a Transfera pricinga isa useda bya companiesa toa
valuea theira assetsa asa lowa asa possiblea toa avoida higha taxesa buta IRCa 482a statesa thata thea pricesa chargeda
bya onea aliatea toa anothera aliatea fora thea exchangea ofa goodsa shoulda bea thea samea ifa chargeda toa aa
non-aliate.
Ina Facebooksa case,a thea companya moveda theira assetsa toa aa subsidiarya ina Irelanda toa avoida payinga highera
taxesa ina thea U.S.a Ia doa nota agreea witha thisa asa aa companya ora individuala shoulda havea toa paya taxesa ona
assetsa wherea theya area gained.a Ifa alla ora somea ofa thea assetsa werea gaineda ina thea U.S.,a thosea shoulda bea
taxeda ina thea U.S.a Ina Applesa case,a Ia agreea thata thea companya shoulda paya taxesa wherea itsa economica
acvitya takesa place,a whicha ina theira casea isa ina Ireland.a Thea companya isa nota simplya movinga assetsa toa
avoida highera taxesa buta ita doesa havea economica acvitya occurringa ina Ireland.
Transfera pricinga cana beneta corporaonsa ina botha ana internala anda externala seng.a Ita takesa placea
whena thea samea companya transfersa goodsa ora servicesa betweena divisions.a Thea parenta companya cana
alsoa chargea lowera pricesa toa theira subsidiariesa fora partsa ora productsa thana theya woulda sella thea itemsa
fora ona thea market.a Fora example,a imaginea thata oura parenta companya sellsa cara partsa anda thea twoa
subsidiariesa operatea asa smalla mechanics.a Thea parenta companya sellsa onea parta thata isa oena neededa ina
repairsa fora $100a ona thea opena market,a buta onlya chargesa theira subsidiariesa $75.a Overa thea coursea ofa aa
month,a thea parenta companya sellsa 10a ofa thesea partsa toa thea market,a anda 10a toa thea subsidiary.a Ifa thea
productsa werea alla chargeda ata thea samea price,a thea parenta companya woulda havea revenuea ofa $2,000a fora
thea month,a however,a theya onlya havea $1,750,a indicanga aa lowera amounta ofa income,a anda therefore,a aa
lowera taxablea basea anda taxa owed.a Ata thea samea me,a ifa thea subsidiarya paida $100a fora eacha ofa thea 10a
productsa purchased,a theira COGSa woulda bea $1,000,a buta sincea theya hada aa lowera costa fora thea product,a
COGSa area $750.a Whilea ita seemsa thata thea transfera pricinga methoda oersa thea abilitya toa transfera taxablea
incomea anda expensesa betweena aa parenta anda itsa subsidiariesa toa createa aa wash,a thesea transfersa doa nota
showa ona nanciala reportsa presenteda toa investors,a oeringa thema witha aa skeweda representaona ona
howa thea companya theya area suppornga isa performing.a
Transfera pricinga withina mulnaonala corporaonsa allowsa fora thea allocanga earningsa madea bya aa
parenta companya toa theira subsidiariesa ina ordera toa reducea thea taxablea incomea ofa thea parenta
organizaona (Seth,a 2023).a Fora example,a ifa aa corporaona hasa taxablea incomea ofa $1a milliona witha noa taxa
esmatesa madea throughouta thea year,a theya woulda havea aa taxa ratea ofa 21%a anda taxesa duea ofa $210,000.a
Now,a imaginea aa seconda companya witha thea samea taxablea income,a buta twoa subsidiaries.a Thea seconda
companya usesa transfera pricinga toa movea $200,000a ofa theira taxablea incomea toa eacha ofa thea twoa
subsidiaries.a Now,a thea companya hasa taxablea incomea ofa $600,000a anda owesa taxesa ofa $126,000.a Eacha
subsidiarya owesa taxesa ofa $42,000.a Thea totala taxesa oweda betweena thea parenta anda thea subsidiariesa
adda upa toa thea samea $210,000,a however,a nowa thea parenta organizaona isa onlya responsiblea fora $84,000a
lessa thana theya werea originally.a
Ina botha cases,a transfera pricinga betweena subsidiariesa createsa aa washa betweena taxes.a Thea onlya
problema Ia cana seea isa thata thea parenta anda subsidiariesa ofa publica companiesa woulda havea toa makea surea
thisa wasa accuratelya presenteda ina theira nanciala reports.a
Transfera pricinga asa stateda ina Secona 482a ofa thea codea givesa thea IRSa authorizaona toa adjusta income,a
credits,a deducons,a ora allowancesa ofa commonlya controlleda taxpayers.a Thisa allowsa thea IRSa toa preventa
evasiona ofa taxes,a asa wella as,a ita willa allowa thema toa clearlya reecta theira income.a Whena ita comesa toa
transfera pricinga largea corporaonsa pusha towardsa valuinga theira assetsa asa lowa asa possiblea ina ordera toa
avoida highera taxes.a Secona 482a ensuresa thata alla personsa paya thea samea amounta ina taxesa ifa theya area
undera thea samea circumstancesa asa onea another.a
Ina thea casea ofa Facebook,a ita chosea toa movea assetsa toa ana Irisha subsidiarya toa avoida highera taxes.a Thisa
allowsa fora Facebooka toa avoida highera taxa liabiliesa asa aa company.a Ia doa nota agreea witha Facebooka doinga
thisa becausea youra assetsa shoulda bea taxeda wherevera theya area gained,a anda ina thisa casea ifa theya werea
gaineda ina thea Uniteda States,a theya musta bea taxeda ina thea Uniteda Statesa ina regardsa toa thea wholea
amounta ofa theira value.a Whena ita comesa toa thea situaona fora Apple,a Ia agreea thata whatevera statea youa
area doinga businessa ina isa thea onea wherea youa shoulda bea taxed.a Therefore,a ifa alla ofa Apple'sa economica
acvitya takesa placea ina Irelanda thena ita shoulda indeeda bea taxeda ina Irelanda rathera thana thea Uniteda
States.a
Reference:
Transfera Pricinga |a Internala Revenuea Service.a (n.d.).a Www.irs.gov.a
hps://www.irs.gov/businesses/internaonal-businesses/transfer-pricinga
Managementa Studya Guide.a (n.d.)a Howa area Lossesa Treateda ina Corporatea Tax?a
hps://www.managementstudyguide.com/how-are-losses-treated-in-corporate-tax.htm
Seth,a S.a (2023,a Maya 28).a Investopedia.a Transfera Pricing:a Whata ita isa anda Howa ita Works,a Witha Examples.a
hps://www.investopedia.com/terms/t/transfer-pricing.asp
Cornella Law.a (n.d.).a 26a U.S.a Codea §a 482a -a Allocaona ofa incomea anda deduconsa amonga taxpayersa
[Reviewa ofa 26a U.S.a Codea §a 482a -a Allocaona ofa incomea anda deduconsa amonga taxpayers].a Cornella
Law.a Retrieveda Julya 5,a 2023,a froma hps://www.law.cornell.edu/uscode/text/26/482
Worstall,a T.a (2016).a Whata Facebooka anda Applea Cana Teacha Youa Abouta Transfera Pricing.a Forbes.a
Retrieveda Julya 6,a 2023,a froma hps://www.forbes.com/sites/mworstall/2016/07/29/facebooks-fun-
with-transfer-pricing-and-joe-sglitz-doesnt-understand-apples-tax-at-all/?sh=563b3d7e3838
