11.6　Transfer pricing

Transfer pricing, also known as internal pricing, refers to the pricing of goods and services that are bought and sold (transferred)between members of a corporate family.In other words, transfer pricing is the process of determining the prices of (intermediate and finished)goods and services sold by the parent multinational firm to a subsidiary, sold by the subsidiary to the parent firm and sold by one subsidiary to another.The level of transfer prices affects the attractiveness of payments from the perspectives of the subsidiaries and the parent firm.

In setting transfer pricing policies, many factors are considered.Some of these factors are discussed below.