The transfer price is the price charged between different areas of a company or between different companies within a group for goods and services exchanged within the company (e.g. goods deliveries, licenses, loans, provision of employees). It plays a major role in tax law, as it can be used to shift profits to lower-taxed regions (e.g. due to different trade tax rates) or countries (low-tax areas, tax havens). There are therefore complex regulations to prevent abuse. At international level, for example, the OECD has adopted an action plan against BEPS (base erosion and profit shifting), which has been or is to be implemented in local law by many countries.
The principle here is always the arm’s length price, i.e. the appropriate transfer price is the price that an independent third party would have paid. The OECD stipulates for its member states that cross-border services and deliveries are only to be recognized for tax purposes if the conditions for these services and deliveries are at arm’s length. If this condition is not met, the tax authorities are entitled to increase the profits at the expense of the taxpayer. This applies regardless of the size of the company or the intra-group flow of goods or services.
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