Transfer pricing is simply the act of pricing of goods and services or intangibles when the
same is given for use or consumption to a related party (e.g. Subsidiary)
There can be either Market-based, i.e. equivalent to what is being charged in the outside
market for similar goods, or it can be non-market based. Importantly, two-thirds of the
managers say their transfer pricing is non-market based.
There can be internal and external reasons for transfer pricing. Internal include
motivating managers and monitoring performance, e.g. by putting a cost to imported
inputs. External would be taxes and tariffs
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