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Displaying items by tag: idea
Friday, 09 November 2012 04:27

Transfer Pricing

Transfer Pricing and Fundamental Price

The fundamental principle is that the transfer price should be similar to the price that would be charged if the product were sold to out side customers or purchased from outside vendors. Transfer pricing, for tax purposes, is the pricing of intercompany transactions that take place between affiliated businesses.

A deal between two interrelated or enterprise associates parties. That is behavior as if they were not related, so that there is no query of a disagreement of attention. In simple way we can describe this as “a deal between two unconnected or associate parties”. The concept of an arm's length deal is to make sure that both associates in the transaction are behave in their self attention and are not issue to any force or pressure from the other associate.

International transactions dealt between two or more Associated Group Enterprises or entities, are called Intercompany Transfer Pricing.

Transfer Pricing and Audit risk

Tax payer must disclose of related-party transactions in the tax return. Domestic and international related-party transactions are required to be disclosed. The information that must be disclosed includes the type of transaction, the value of the transaction, the transfer price and the method used to determine the transfer price.
In practice, taxpayers that exhibit the following characteristics are more at risk of being subject to a transfer pricing audit:

•    A large number of related-party transactions
•    Losses situation and process the tax claim
•    An increase in gross revenue or receipts but no change in net profit
•    Associated parties in tax havens
•    Lower net profit in comparison to the industry average or other similar enterprises.
Published in General Data

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Tax Audit on Transfer Pricing

Indonesia Tax Director has released the circulation letter number SE-07/PJ/2012 about the tax audit strategic. Based on that circulation letter, one of the tax audit object is the entities with the transfer pricing exposure. read more...

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