Transfer Pricing: A Guide for Finance and Tax Professionals
A practical guide to transfer pricing rules, documentation requirements, and CPD for finance professionals.
What Is Transfer Pricing?
Transfer pricing refers to the prices set for transactions between related parties within the same group of companies - for example, a UK subsidiary selling goods or services to a US parent, or charging a royalty for use of intellectual property. Tax authorities in most countries require these prices to be set on an arm's length basis - the same price that would be agreed between independent parties in a comparable transaction.
Why Transfer Pricing Matters
Transfer pricing is one of the largest sources of international tax disputes. Multinational groups can - deliberately or inadvertently - shift profits to lower-tax jurisdictions through intercompany pricing. Tax authorities have invested heavily in transfer pricing enforcement: the UK's HMRC, the US IRS, and the OECD's BEPS framework have all strengthened transfer pricing rules significantly since 2015.
The Arm's Length Principle
The arm's length standard (Article 9 of the OECD Model Tax Convention) is the global benchmark. Accepted transfer pricing methods include the Comparable Uncontrolled Price (CUP) method, Resale Price Method, Cost Plus Method, Transactional Net Margin Method (TNMM), and Profit Split Method. TNMM is the most commonly used in practice because finding genuine comparable uncontrolled prices is often impossible.
Documentation Requirements
Most countries require transfer pricing documentation to be maintained contemporaneously (at the time of the transaction, not retrospectively). The OECD's three-tier documentation approach under BEPS Action 13 requires: a Master File (group-level information), a Local File (entity-level information), and a Country-by-Country Report (for groups with revenue above €750 million).
Transfer Pricing as CPD
Transfer pricing is a specialist area but one that generalist tax and finance professionals increasingly encounter. ACCA and CIMA members can log transfer pricing training - whether via structured courses, conferences, or technical reading - as verifiable CPD hours documented against specific learning outcomes.
Further Reading
Study with Learnsignal: Explore our CPD courses for tax professionals. Browse CPD courses.
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Johnny Meagher
Expert Tutor at Learnsignal
Qualified professional with years of experience in teaching and helping students achieve their accounting qualifications.
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