International transfer pricing
International transfer pricing is setting prices for goods and services exchanged between divisions in different countries. The chosen price determines in which country taxable profit appears within the group.
Also known ascross-border transfer pricing
FrameworkTransfer pricing
See it move
A side-by-side comparison shows how a low transfer price of €80 versus a high transfer price of €120 shifts taxable profit between Division A (taxed at 15%) and Division B (taxed at 30%). At €80, more profit sits in the high-tax Division B jurisdiction, raising the group tax bill. At €120, €40 more profit per unit flows into Division A's lower-tax jurisdiction, cutting the group tax bill by €6 per unit. The note records that tax authorities require arm's-length prices, so artificial profit shifting invites audit and penalties.