Transfer pricing is the setting of the price applied to purchases and sales of goods and services between related parties. Tax legislation requires these transactions to be carried out at arm's length, meaning at the price that would have formed had the parties been unrelated.
A Turkish company selling product to its own LLC in the US is a typical related-party transaction. If the price is kept low and profit is shifted abroad, a disguised profit distribution assessment comes into play and an adjustment is made. The right approach is to document the method used and the benchmarking analysis in writing, and to set pricing consistently with the functions performed and the risks assumed. Documentation obligations grow with volume; even in small businesses, consistent records are decisive in an audit.
A Turkish company selling product to its own LLC in the US is a typical related-party transaction. If the price is kept low and profit is shifted abroad, a disguised profit distribution assessment comes into play and an adjustment is made. The right approach is to document the method used and the benchmarking analysis in writing, and to set pricing consistently with the functions performed and the risks assumed. Documentation obligations grow with volume; even in small businesses, consistent records are decisive in an audit.
A Turkish company selling product to its own LLC in the US is a typical related-party transaction. If the price is kept low and profit is shifted abroad, a disguised profit distribution assessment comes into play and an adjustment is made. The right approach is to document the method used and the benchmarking analysis …
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