Question

Should setting a transfer pricing rule differ between national and multinational companies?

Answer 1

Yea, setting a transfer pricing rule will definitely differ between national and multinational companies:

The reasons are -

When multinational companies setting up transfer prices for products manufactured in different countries, they will include both domestic and foreign tax rates. Due to inclusion of these different tax rates and, import duties in different countries while transferring the components of one product between two divisions, the transfer price will have differences.

For example, A component is manufactured in US by one of companies in US and has transferred to another division located in UK for final assembly, in this case, if the income tax rates in US is lower or higher than the income tax rates in UK then the difference in tax rates will definitely affect the transfer price of that component and also, the different policies in different counties on Import duties will also affect the transfer price.

Hence, while setting a transfer pricing rule will definitely differ between national and multinational companies.