transfer pricing: meaning, definition, pronunciation and examples
C1Technical / Formal
Quick answer
What does “transfer pricing” mean?
The practice of setting prices for goods, services, or intangible assets traded between different parts of a multinational corporation, especially across international borders.
Audio
Pronunciation
Definition
Meaning and Definition
The practice of setting prices for goods, services, or intangible assets traded between different parts of a multinational corporation, especially across international borders.
A strategic accounting and tax-planning method used by corporations to allocate profits and costs among subsidiaries in different countries to minimize overall tax liability or meet regulatory requirements.
Dialectal Variation
British vs American Usage
Differences
Spelling and usage are identical. Minor differences may arise in the surrounding regulatory jargon (e.g., 'HM Revenue & Customs' vs. 'Internal Revenue Service').
Connotations
Universally carries connotations of tax strategy, corporate finance, and potential tax avoidance/evasion debates.
Frequency
Equally common in both UK and US professional business, finance, and tax contexts.
Grammar
How to Use “transfer pricing” in a Sentence
[Noun] + involves/requires/governs + transfer pricingThe [authority] scrutinizes/investigates + transfer pricing + of/for [company]Vocabulary
Collocations
Examples
Examples of “transfer pricing” in a Sentence
verb
British English
- The group needs to establish robust mechanisms to govern its transfer pricing.
American English
- The IRS can challenge how the company conducted its transfer pricing.
adverb
British English
- [Not standard]
American English
- [Not standard]
adjective
British English
- The transfer-pricing regulations are becoming more stringent.
American English
- They hired a transfer-pricing expert to handle the audit.
Usage
Meaning in Context
Business
Central to international tax planning, compliance, and financial reporting for multinational enterprises.
Academic
Studied in fields like international business, corporate finance, taxation law, and economics.
Everyday
Virtually never used in casual conversation.
Technical
A precise term in tax law, accounting, and international regulatory frameworks (e.g., OECD guidelines).
Vocabulary
Synonyms of “transfer pricing”
Strong
Neutral
Weak
Vocabulary
Antonyms of “transfer pricing”
Watch out
Common Mistakes When Using “transfer pricing”
- Using it as a verb (e.g., 'They transfer priced the goods'). It is a noun phrase. Confusing it with general 'pricing strategies' for external customers.
FAQ
Frequently Asked Questions
No, it is a legal and standard accounting practice. However, it becomes illegal if used for tax evasion by setting prices that do not reflect market value ('arm's length principle').
National tax authorities (like HMRC in the UK, IRS in the US) and international bodies like the OECD, which sets widely accepted guidelines.
The key international standard requiring that transfer prices between related companies be the same as if the companies were unrelated, independent entities negotiating under market conditions.
It can be used for 'profit shifting,' where companies move profits to low-tax jurisdictions, reducing their overall tax burden and potentially depriving countries of tax revenue.
The practice of setting prices for goods, services, or intangible assets traded between different parts of a multinational corporation, especially across international borders.
Transfer pricing is usually technical / formal in register.
Transfer pricing: in British English it is pronounced /ˈtrænsfəː ˈpraɪsɪŋ/, and in American English it is pronounced /ˈtrænsfɚ ˈpraɪsɪŋ/. Tap the audio buttons above to hear it.
Phrases
Idioms & Phrases
- “[Not commonly idiomatic]”
Learning
Memory Aids
Mnemonic
Think of a corporation TRANSFERRING profits between its national branches by setting internal PRICES.
Conceptual Metaphor
CORPORATE FINANCE IS A GAME OF GEOGRAPHICAL PROFIT ALLOCATION.
Practice
Quiz
What is the primary purpose of transfer pricing within a multinational corporation?