Complete the following statement: Transfer pricing allows    companies to move    between their    companies, in order to    the    tax they have to pay.Submit

Transfer pricing allows multinational companies to move profits between their subsidiaries in different countries, in order to minimize the overall tax they have to pay. This is achieved by setting prices for goods, services, or intellectual property that are traded between the related companies in a way that shifts income to jurisdictions with lower tax rates.

The strategy hinges on the fact that different countries have varying tax laws and rates, allowing companies to strategically allocate income to lower-tax jurisdictions while keeping costs in higher-tax jurisdictions. This practice can help companies enhance their profitability and competitive position in the market but may also raise concerns among tax authorities about potential tax avoidance or evasion. As such, there's a constant regulatory focus on ensuring that transfer prices are set in a manner that reflects the market value of the transactions, often necessitating documentation and compliance with local and international tax regulations.