An organization that sells products to a foreign subsidiary wants to charge a price that will decrease import tariffs. Which of the following is the best course of action for the organization?
C. Charge at the arm's length price, as it ensures compliance with both tax regulations and international transfer pricing rules. This approach helps avoid the risks associated with lowering the price too much to reduce tariffs, while still maintaining proper pricing that tax authorities can accept as reasonable. If minimizing import tariffs is the priority, it should still be done within the boundaries of these regulations.
Per CFI: Transfer pricing helps in reducing duty costs by shipping goods into countries with high tariff rates by using low transfer prices so that the duty base of such transactions is lowered.
So maybe it's A. I don't see how charging them the market price (arm's length) LOWERS the tariffs. A tariff is a percentage of whatever you sell at any price. So if it's 10% of $100, it's $10 - but if you LOWER the sale price to $50, it's 10% of $50, which is $5, ergo: Decreasing the transfer/sale price will also LOWER/DECREASE the tariffs.
A voting comment increases the vote count for the chosen answer by one.
Upvoting a comment with a selected answer will also increase the vote count towards that answer by one.
So if you see a comment that you already agree with, you can upvote it instead of posting a new comment.
emtofid
1 month, 2 weeks ago34205ac
3 months, 3 weeks agoElvin
1 year, 1 month agoWalewweeeed
3 years, 5 months agosuperman26
3 years, 8 months agoyomang
3 years, 8 months agoChamak
3 years, 10 months agoChamak
3 years, 10 months agotinanina
3 years, 11 months ago