A Study on Accounting of Transfer Pricing and Its Effect on Taxation

Abstract

The dimension of accounting of transfer pricing as one of the essential instruments of profit transfers between businesses has not been studied sufficiently. In this study, a review was conducted on occurrence of transfer pricing and how accounting transactions will be conducted required to be conducted by the entities. However, it is evaluated how transfer pricing will affect corporate tax via a case study. In order to make the study more concrete, the conceptual framework was revealed in the light of previous literature and accordingly a scenario was developed. In line with information in the scenario developed, it was indicated first how transfer pricing was conducted, and then a recommendation was stated in the accounting records required to be conducted for improvement by the entities. However, tax effect of the present case was determined before and after adjustment. According to such, it is concluded that related parties of transfer pricing should follow a record process considering simultaneous movement form and off-balance sheet accounts in adjustment transactions.