Challenges and solutions in era of international taxation

Why does the same product have different prices in different countries? This simple but intriguing question highlights one of the most complex issues in international taxation. Imagine a Korean subsidiary of a multinational company buying components from its headquarters for $100 per unit, while an independent local firm purchases the same item for $80. Should tax authorities simply accept the $100 price? On the surface, it may appear to be a legitimate transaction between a parent and its subsidiary, but for tax administrations, these differences raise important transfer pricing concerns. Transfer pricing refers to the price at which assets, services or intangible rights are exchanged between related entities within a multinational enterprise. If these prices are not adjusted properly, profits can be shifted to certain jurisdictions, resulting in tax avoidance or imbalances in tax revenue. To prevent this, tax authorities worldwide apply the arm’s length principle — a global standard that ensures transactions between related parties are priced as if they occur between independentWeiter zum vollständigen Artikel bei Korea Times Weiter zum vollständigen Artikel bei Korea Times