What is transfer pricing and why does it matter?

Transfer pricing refers to the prices charged in transactions between related parties in different countries — such as a U.S. parent company selling goods or services to a foreign subsidiary, or a foreign parent charging management fees to a U.S. affiliate. Tax authorities in the U.S. and around the world require that these intercompany transactions be priced at arm’s length — meaning at the price that unrelated parties would charge each other in a similar transaction. Inadequate transfer pricing documentation is one of the most common triggers for international tax audits and can result in significant income adjustments, double taxation, and substantial penalties. Yeo & Yeo’s transfer pricing specialists help businesses establish defensible arm’s length pricing, prepare the documentation required by U.S. and foreign tax authorities, and develop transfer pricing policies that minimize global tax burden while withstanding regulatory scrutiny.