Advantages of Transfer Pricing for Your Organization
What is Transfer Pricing?
Whether you are running a small company or a multinational enterprise, transfer pricing is a highly useful tool for businesses to deal with a variety of international tax issues.
It makes sure that your company complies with global regulations and allows you to generate higher profits by availing several tax benefits.
In this article, you will learn about all the important aspects of transfer pricing documentation and its several benefits.
Purpose of a Transfer Pricing Document
a. Generate Profits
Transfer pricing is an essential process in allowing organizations to generate profits for all their divisions and departments. It also provides them with a reliable metric to determine the performance of each department individually.
b. Resources Allocation
Another way to understand the importance and purpose of transfer pricing is to be familiar with the fact that several entities are operating under a single organization.
Therefore, multinational organizations can greatly benefit from professional accounting services in Malaysia for preparing transfer pricing documents.
It simply means that transfer pricing plays a critical role in the allocation of the profits, especially when organizations have to manage several tax liabilities in different countries in which a company is doing business.
As a result, managers can easily set the price among different divisions of the organization.
Benefits of a Transfer Pricing Document
It is quite evident that the purpose of the transfer pricing documentation is to benefit the organizations in different ways. Following are some of the most important benefits of transfer pricing:
1. Tax Benefits
When an organization is able to perform reliable transfer pricing documentation, it gets several tax reliefs, which helps it avoid tax in different countries.
2. Lower Tax Rate
As a result, the organization will have no issue in complying with international tax laws, ensuring continuous growth with greater profits.
3. Avoid High Tariffs
4. Avoid/Reduce Tax Liability
There are several principles that accounting services in Malaysia use to determine the arm’s length price of the transactions taking place between two independent parties.
5. Reduce Duty Costs
Transfer pricing helps the organizations in reducing the duty costs. Moreover, organizations are able to ship goods to high tariff countries at minimum transfer prices.
Thus, the duty base is comparatively lowered.
6. Reduce Income Taxes
This is possible by overpricing the goods they are transferring to countries that have lower tax rates.
Hence, the overall profits are balanced, and businesses can generate higher profits.
The Bottom Line
From a taxation perspective, transfer pricing offers various advantages for a company. It takes advantage of different tax regimes in different countries.
In certain instances, organizations can even lower their expenditure on interrelated transactions.
By engaging the services of an accounting company in Malaysia, organizations that stand to benefit from transfer pricing will have access to professional consultation, including meeting the transfer pricing documentation requirements set by law.
For more information, feel free to get in touch with us.
