TRANSFER PRICING – A NEW TAX CHALLENGE FOR MULTINATIONAL COMPANIES

Abstract

In our increasingly digitalized economy characterized by a high number of international transactions and a high speed of information exchange between jurisdictions, there are many challenges that can arise - in different domains of economic activity - from this context, challenges that our society has to manage and overcome. Among these, we can mention a current problem, namely the one related to the transfer pricing mechanism in the context of intra-group transactions of the multinational companies, which used improperly by them, can be an instrument for illegal transfer of their profit in low-tax jurisdictions, evading this way from their tax obligations. In the context of these facts, the fair transfer pricing mechanism can be seen as having a very significant role in creating an ethical and fair environment for this kind of transactions, helping to combat and reduce the tax evasion and money laundering levels on a global scale, as well as being one of the main solutions to tackle the base erosion and profit shifting (BEPS) phenomenon. This paper aims to create – using the observation, analysis and deduction research methods - a clear image for the readers, giving them the possibility to understand the meaning, the role and the implications of the transfer pricing mechanism in the economic international environment and in the social life of the citizens.

Keywords

• transfer pricing mechanism
• arm’s length principle
• market value principle
• multinational company
• intra-group transactions
• tax haven
• double taxation.