Hedging and Transfer Pricing

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Sylvia
Student (MBA), Kenya

Hedging and Transfer Pricing

What is the relationship between hedging and transfer pricing?

  Jaap de Jonge
Editor, Netherlands
 

Hedging and Transfer Pricing

Transfer Pricing refers to actions relating to setting appropriate prices for transactions between related parties, typically among divisions in large firms when they are supplying each other with certain goods or services. In this definition, ‘appropriate’ is most commonly defined as ‘at arm’s length’.
Under the arm’s length principle, related tax payers must set transfer prices for any intercompany transaction in the same way as they would be set by unrelated firms in the marketplace, while keeping all other aspects of the relationship unchanged.
Transfer pricing must accommodate for differences between tax regimes of countries and valuta risks. These risks can be hedged (insured against).

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Hedging and Transfer Pricing
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