TRANSFER PRICING AND INTERNATIONAL TAXATION
INITIAL
CONCEPT
The complexity of the
laws and rules that determine the tax for foreign companies and the profits
generated abroad actually derived from some basic concepts
1. Neutrality
tax is the that the taxes do not have an influence (or neutral) against the
decisions of allocation of resource.
2. Equity
tax is the that the compulsory tax that facing a situation that resemble and
the similar undue pay the taxes who same but against of disapproval inter how
the implements the this concept.
PROFIT
FROM THE SUMBAR taxation abroad,
Some States separti
french, costal Rica, hongkong panama south africa, swiss and venezuala apply
the principle of territorial taxation and impose taxes on companies that are
domiciled in the country that profits generated outside the State. While most
countries (including Australia, Brazil, China, Czech Republic, Germany, Japan,
Mexico, Netherlands, UK, and Amarika States) to apply the principles throughout
the world and impose taxes on profits or income of companies and citizens in
it, regardless of the territory of the .
FOREIGN
TAX CREDIT
Tax credits can in the
estimate if the the amount of income tax outer that nation that they paid will
not too unclear (ie when the child companies overseas sends partly profits
which sourced from overseas to the the parent domestic companies). Dividends
are reported here in the parent company's tax return should be calculated gross
(gross-up) to cover the amount of taxes (which are considered paid) plus all
foreign levies taxes applicable. This means that as if the parent company
receives dividends domestically which includes taxes owed to foreign
governments and then pay the tax.
Indirect tax credit
allowed foreign (foreign income taxes deemed paid) is determined as follows:
Dividend payments
(Including all tax
levies)
x foreign tax can be
credited
Profit after tax
foreign income
PLANNING
TAX IN COMPANY MULTINATIONAL
In the tax planning of
multinational companies have certain advantages over a purely domestic firm
because it has greater flexibility in determining the geographic location of
production and distribution systems. This flexibility provides the opportunity
to utilize their own national tax ataryuridis differences so as to lower the
overall corporate tax burden.
Observations top of
problem planning this tax in began to with two things basic:
1. Tax
considerations should never mengandalikan business strategy
2. Changes
in tax laws are constantly limit the benefits of tax planning in the long term.
VARIABLES
IN TRANSFER PRICING
Transfer prices set a
monetary value on the exchange between firms that take place between the
operating unit and is a substitute for market prices. In general, the transfer
price is recorded as revenue by one unit and the unit cost by others.
Cross-border transactions of multinational corporations are also open to a
number of environmental influences that created the same time destroying the
opportunity to increase profits through transfer pricing. A number of variables
separti tax rate competition infalsi rates, currency values, limitations on the
transfer of funds, political risk and the interests of joint venture partners
are very complicated transfer pricing decisions.
TAX FACTOR
Reasonable transaction
price is the price to be received by parties not related to special items the
same or similar in the exact same situation or similar. Reasonable method of
determining the transaction price that is acceptable is:
1. the
method of determining the comparable uncontrolled price.
2. method
of determining the resale price.
3. plus
the cost price determination methods and
4. other
methods of assessment rates
DEFINITION FACTOR
Tariffs for imported
goods also affect transfer pricing policies of multinational corporations. In
addition to the balance didentifikasikan, mulinasional companies should
consider the costs and benefits, both internal an external. High
tax rates paid by the importer will generate the income tax base is lower.
Competitiveness
Factors
Similarly, a lower
transfer price can be used to protect the ongoing operation of the influence of
foreign competition is increasingly tied to the local market or other markets.
Considerations the competitiveness like it should be be balanced against
against many losses which result vice versa. Transfer rates for competitive
reasons may invite anti-trust action by the government.
Performance
Evaluation Factors
Transfer pricing policy
is also influenced by their influence on behavior management and is often the
main determinant of company performance.
Accounting
for Contributions
The management
accountant can mamainkan a significant role in calculating the balance
(trade-offs) in transfer pricing strategies. The challenge is to maintain a
global perspective when mapping the benefits and costs associated with
determining pricing decisions
TRANSFER
PRICING METHODOLOGY
In a world with very
competitive transfer rates, it will be a big deal when they wanted to transfer
pricing resources and services between firms. However, there is rarely a
competitive external market for products that are transferred between related
entities is special. Problem of determining these costs are felt in the
international level, because the concept of cost accounting is different from
one country to another.
Principle
of Fair
A common type of
multinational companies is the integration operation. Subsidiaries are in the
same control as well as sharing the same source and destination. The need to
declare taxable income in different countries means that multinational
companies must allocate income and expenses among subsidiaries and determining
transfer prices for transactions between companies.
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