Transfer Pricing
Pricing of transactions between related entities, required to reflect arm's-length terms — what unrelated parties would have agreed.
In full
Transfer pricing governs every intercompany transaction in a multi-tier corporate structure — sales of goods, license of IP, provision of services, intercompany loans. Under the arm's-length pricing rules, the IRS may reallocate income between related parties to reflect what unrelated parties would have agreed. Common methods include comparable uncontrolled price (CUP), cost-plus, profit-split, and the residual profit-split method.
Governed by: Arm's-length pricing rules.
This definition is general information about how the term is used in U.S. cross-border tax. It is not advice, and how it applies depends on your own facts and on the treaty, if any, in force with your country.