A Study On The Transfer Pricing Of Related Party Transactions For Listed Companies

It is economic globalization that makes more and more foreign companies to invest in our country,under the fierce market competition,companies will implement Internal transactions between affiliated companies by means of transfer pricing in order to achieve the maximum profit.This method can improve the companies’ economic benefits and reduce the transaction costs at the same time.But if companies implement related party transactions for some improper purposes,such as evasion of taxes or transfer of profits,it will erode our country’s tax revenue,affect the normal and orderly development of economy and society.Therefore,now most countries around the world attach great importance to the connected transaction transfer pricing,and relevant international departments has formulated related laws and regulations to supervise and standardize the connected transaction transfer pricing.Standing in the company’s point of view,connected transaction transfer pricing is a double-edged sword.It would help the company achieve its stated goals and increase the profits of the company if it could be used correctly.While,although the unreasonable transfer pricing strategy can achieve the goal of increasing revenue in the short term,it can bring a series of risks to the company.For example,if the connected transaction transfer pricing approved by the tax authorities for tax illegal behavior,the company must pay back taxes and interest according to the law,it not only brings financial losses to the company,but also damages the image of the company.So learn how to better use the connected transaction transfer pricing,and ensure that the transfer pricing can meet the needs of company’s development and conform to the fairness of the market,make it play a better role,are questions that must be seriously considered by each company which has connected transactions.This paper reviewed domestic and foreign related literature at first,then summarized the meaning,the motivation and the relevant laws and regulationsof related party transactions transfer pricing.On the basis of these,choose GITI Tire Co.,LTD.for the case,select the Transactional Net Margin Method to judge the rationality of the company’s transfer pricing,and use the quartile method to collate the data.The result showed that the transfer pricing of GITI Tire Co.,LTD.is reasonable.But Influenced by some external factors such as market policy change and raw material price fluctuation,Its profit margins of2015 are significantly higher than comparable companies.Analyze the reasons for this result,and provide some revelations for other companies in the connected transaction transfer pricing by this case.