How do transfer pricing rules affect international taxation?

Transfer pricing rules affect international taxation by requiring countries to accurately assess and report the income of cross-border transactions. These rules ensure that companies cannot manipulate the profit they report in different countries, which prevents them from avoiding taxes. The transfer pricing process requires companies to determine the market value of their goods and services that are transferred between related companies in different countries. The value of these goods and services is then used to determine the total income of the company, which is subject to taxation in the countries involved. For example, if a company based in Washington manufactures a product and sells it to a related company in another country, the sale will be subject to taxation. The transfer pricing process requires the company to calculate the fair market value of the product, which will also be taxed in the other country. These transfer pricing rules help to ensure that companies are not manipulating the amount of income they are reporting to different countries in order to avoid taxes. This helps to create a more level playing field for companies, and ensures that all countries are receiving the taxes owed.

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How do transfer pricing rules affect international taxation?

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