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Transfer pricing refers to the practice of setting prices for goods and services sold between related companies within a multinational enterprise. The aim is to ensure that transactions between related companies are conducted at arm’s length, meaning the price should be similar to what would be charged to an unrelated third party. This is important to avoid tax evasion and ensure fair taxation across borders.
This is important for tax purposes, as it helps to prevent tax evasion and ensure that companies are paying the appropriate amount of tax in each country where they operate. Transfer pricing is a complex area that requires expertise in tax law, accounting, and economics.
