Tranfer pricing, Approaches to transfer pricing, Internal transaction price, Dividing the total income, Foreign Direct Investment Enterprise evade taxs

Abstract

Transfer pricing is commonly stemmed from the measurement stage amongst accounting methods, including(i)
Classification, (ii) Recognition and Derecognition, (iii) Measurement, (iv) Presentation and Disclosure. This
activity is carried out by influencing trading price, thereby reducing the payable tax amounts as much as possible.
Currently, some enterprises take advantage of the differences between tax rates and tax allowances in two
countries to establish their internal transaction price policies. Besides that, there also exist those firms that are on
trial for fraud and tax evasion by manipulating the price in related/affiliated party transactions.
This article summarizes commonly used accounting methods to manipulate transfer price taxation and provide
some solutions for preventing transfer price tax evasion.