International transfer pricing restrictions: impact on corporate financial policy

Abstract

Transfer pricing is a pervasive issue that presents significant tax savings potential concerning international enterprises. The authors discuss company incentives to manage transfer prices in an artic/e appearing in the preceding issue of this journal. In response to these incentives, governments have increasingly enacted and enforced domestic restrictions on transfer prices. In this article, contemporary norms restricting transfer pricing are analyzed. The OEGD and US pricing standards are assessed and Brazil's recent application of these standards is considered. Transfer pricing methods are described and evidence of their use is presented. We conclude by describing an intercompany transfer pricing policy intended to facilitate internaI financiaI management and minimize externaI tax threats.