Describe on Transfer Pricing

Transfer Pricing policy generally aimed at, evaluating financial performance of different business units (profit centers) of a conglomerate, and to shift earnings from a high tax jurisdiction to a low-tax one. It is the price at which divisions of a company transact with each other, such as the trade of supplies or labor between departments. It’s results in the setting of prices among divisions within an enterprise. Tax authorities usually frown upon transfer pricing aimed at tax avoidance and insist that each internal part of the firm deals with the other on ‘arm’s length’ basis.