International Transfer Pricing: A Review of Non-Tax Outlook

AbstractWorldwide there are a lot of controversies and debates between the tax authorities and the MNC's about the related party transaction pricing. The tax authorities contest on the grounds that non arm's length price is depriving them of rightful revenue and that the MNC's are doing this to save on tax liability. This is not the case always. It is one of the considerations in the related party transfer pricing. The study tries to find the objectives behind the pricing strategy by the MNC's. Through extensive literature survey the study finds that the tax liability management is not the only objective that the MNC's have while pricing the related party transactions but there are other objectives that have priority in the global strategy of the MNC's which also play a vital role in pricing strategy. The global objectives demand movement of funds from one location to other for various purposes for which non arm's length pricing is used. The study finds that non tax outlook in transfer pricing is very strong and in some cases compelling to affect the transfer pricing strategy. The study finds various purposes other than tax liability management which the MNC's have to attend to while deciding their related party pricing strategy