TaxesRoyalties Net profit Captive bank Private ruling Invoice basis Fraud
Compensating adjustment
In the realm of taxation, there exists a concept known as transfer pricing, where a taxpayer must determine an appropriate price for transactions between associated enterprises. This price, referred to as an arm's length price, is meant to reflect the value that would have been exchanged had the transaction taken place between unrelated parties. However, in certain circumstances, a taxpayer may make an adjustment to this transfer price, reporting it as their arm's length price for tax purposes, despite it differing from the actual transaction amount. This adjustment must be made before filing the tax return.
Related terms
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