What is transfer pricing?

What is transfer pricing?

Transfer pricing the price at which the movement or transfer of goods take place between an MNC and its subsidiaries in different nations. Eg. An MNC which procures raw materials in one country, processes them in another, assembles the partly finished goods in yet another and obtains the finished goods and sells them in the fourth one.The government of the host country receives sales tax for the goods while importing countries impose import duties to ensure sufficient revenues from taxes on import of the MNC's goods.