StudentShare solutions
Triangle menu

Assignment 4: Transfer Pricing - Research Paper Example

Extract of sample
Assignment 4: Transfer Pricing

The U.S. has an aggressive transfer pricing policy environment as administrators and legislators pursue to lure foreign investment. Transfer prices entail changes made between controlled (or related) entities such as branches and companies that can be either wholly or majority owned by a parent company. The paper explores diverse scenarios of transfer pricing that an entity can pursue to minimize the tax burden. Discussion Based on their earnings and transactions, it may be rewarding for U.S. corporations operating offshore to launch separate foreign entities to conduct business abroad. In the event that a U.S. corporation operates abroad as a foreign corporation and reinvests its foreign earnings offshore, then the U.S. income tax can be deferred until the income may be repatriated in the form of dividend. Similarly, a U.S. corporation (with the exclusion of a Subchapter S corporation) can claim a credit for foreign income taxes paid, which can avert the situation of income getting taxed twice (by both the U.S and the foreign jurisdiction). Another approach in which companies can alleviate the tax burden centers on seeking ways to generate wealth within countries with lower tax rates (Collins, Chamberlin, & Hirsch, 2012). For instance, a multination labeled as USAco, based in the U.S., manufactures and sells cars within the U.S. plus other two foreign countries (in this case Mexico and Ireland). The foreign sales for the company are made via CARco, which represents a wholly owned foreign corporation. Irrespective of the transfer price employed for sales by USAco to CARco, the foreign sale income amounts to $300 per car [the final sales price minus $1000 manufacturing cost minus the $200selling expense]; nevertheless, transfer prices so the impact on the allocation of the combined profit between the two entities (USAco and CARco). A transfer price of $1000 would allocate the amalgamated profit of $300 wholly to CARco, while, in the other extreme, a transfer price of $1300 would allocate the amalgamated profit of $300 entirely to USAco. In the event that the tax rate differs between that of the U.S and that of foreign countries (U.S (35%) and the applicable foreign tax rate for Mexico/Ireland (25%), the USAco group can minimize its global taxes by employing higher transfer prices for its controlled sale. In the example, is the transfer price of $1000 is employed for sale by USAco to CARco the $300 gross profit is mainly allocated wholly to CARco, and the total tax on that profit translates to foreign tax of $135 [$300 income multiplied by 25% foreign tax rate]. A multinational company (MNC) might utilize transfer pricing strategies for two core purposes: income tax liability reduction or funds repositioning. In the event that the tax rate within the country of the selling affiliate is lower than the tax rate within the buying affiliate country, a high, markup policy on sales is likely to leave minimal taxable income within the buying affiliate country to be taxed at an increased rate (Urquidi, 2008). Even if, the tax rate within the purchasing affiliate is not higher than that of the selling affiliate country, a higher markup policy will leave reduced funds to be removed from the purchasing affiliate country. In the event that a transfer price is enhanced, the selling firm’s revenue and profits rise, and the receiving firm’s profits dip. Selling brand new cars for $1000 to a related firm within a tax haven, which ...Show more

Summary

Transfer Pricing Author Insttitution Transfer Pricing Introduction Transfer pricing represents an intricate yet interesting challenge to MNCs, who ought to establish suitable prices at which goods, services, intellectual property, and financial instruments are transferred among the affiliated entities…
Author : erich15
Assignment 4: Transfer Pricing essay example
Read Text Preview
Save Your Time for More Important Things
Let us write or edit the research paper on your topic
"Assignment 4: Transfer Pricing"
with a personal 20% discount.
Grab the best paper

Related Essays

Amazon.com - transfer pricing, taxation and the role of corporate social responsibility
The report contains a short introduction of Amazon.com, the explanation of affects of transfer pricing and taxation on Amazon.com. The role of taxation in transfer pricing and other tax issues are also included in this paper. In this research the affects of corporate social responsibility and reporting on Amazon.com are examined and discussed properly.
6 pages (1500 words) Research Paper
Assignment 4
The company allowed incumbent who did not have a high school education to transfer from an outside job opportunity to an inside job opportunity by passing two tests; The Bennett Mechanical Aptitude Test, and Wonderlic Personnel Test that allegedly measures general verbal facility.
4 pages (1000 words) Research Paper
Pricing
Pricing is even more important when introducing cutting edge technology or products. This paper discusses the most appropriate pricing option available for Whirlpool. As the product manager for Whirlpool’s line of washing machines, skimming would be the best pricing method to choose when pricing the new washing machine’s price.
3 pages (750 words) Research Paper
Assignment 3: International Taxation and Foreign Tax Credits
A taxpayer could establish a partnership kind of business or a corporation. For these types of organizations, income taxes on the earnings realized will be “passed through” to the shareholders, who pay them on their yearly tax returns. If he establishes a corporation, it will mean that the corporation pays income taxes earlier on income, while the shareholders pay taxes separately on those earnings upon distribution as dividends.
4 pages (1000 words) Research Paper
International Taxation - Transfer Pricing
[Shaxon, N. (2012)] In order to acquaint with the concept of transfer pricing, consider two companies, that is a parent companies and a subsidiary company or two subsidiaries that have the same parent company, actively involved in trading with each other.
8 pages (2000 words) Research Paper
Assignment 4
In order to effectively access about how healthy a population is, the measurement or the identification of each individual within a particular community can provide adequate information relating to the level of well-being. The process of measuring the annual expenses of individuals within a community can ensure towards maintaining their health related issues by a greater level.
3 pages (750 words) Research Paper
Pricing
According to the report pricing strategy is the task of the top management with the help of middle level and low level management. This is done by analyzing the local and the international market, clear method of analyzing the conditions where a successful marketing can be carried out. Pricing is the process of influential decision.
6 pages (1500 words) Research Paper
WGST400 Assignment 4
In wars, these women have also helped fight for various causes, often assisting and fighting alongside men. During the First World War, women too have been mobilized and assigned various functions, and their efforts have been
20 pages (5000 words) Research Paper
MT140 Unit 4 Assignment
The new coordinating employee will coordinate with all the location managers and will directly deal with them according to the vision and policies of the business (Samovar & McDaniel, 2010). CEO
1 pages (250 words) Research Paper
WGST 400 Assignment 4
The term “feminist” was first used by the French socialist, Charles Fourier, in the early nineteenth century to refer to a “new women” who is
20 pages (5000 words) Research Paper
Get a custom paper written
by a pro under your requirements!
Win a special DISCOUNT!
Put in your e-mail and click the button with your lucky finger
Your email
YOUR PRIZE:
Apply my DISCOUNT
Comments (0)
Rate this paper:
Thank you! Your comment has been sent and will be posted after moderation