Abstract
Research background:All of the world’s economic relations in today’s world are subject to the process of globalization. Increasingly, the economic activity of many entrepreneurs transcends national borders, often operating in the form of multinational companies. Through the Transfer Pricing Institute, multinational companies can transfer their pre-tax profits from one country to another, and this phenomenon often harms the affected countries, which can result in lower tax revenues and a deterioration in the balance of payments. Transfer pricing generally seeks to prevent similar shifting of profits and thus prevent possible tax evasion.Purpose of the article:The aim of this article is primarily to summarize the knowledge and procedures of transfer pricing and its importance in the conditions of the Slovak Republic. The article also aims to explain to the general public why transfer pricing is important and necessary for a healthy economy.Methods:In this work, the methods of induction, deduction, and comparison were used to obtain a true picture of the issue of transfer pricing. Methods of synthesis and analysis of the researched issues were also used.Findings & Value added:In addition to a general overview of this issue, we consider the result of this work to summarize the legislative framework of transfer pricing and also provide a brief and clear example of the transfer of profits in transfer pricing between two and within one country and their impact on the country’s economy.
Highlights
In connection with the constant growth of globalization, transfer pricing is currently gaining more and more global importance
As we have already mentioned, the legislative regulation of transfer pricing in the conditions of the Slovak Republic characterizes the methods of this valuation, which are based on the issue of transfer pricing in the conditions of the Slovak Republic is regulated by Act No 595/2003 Coll. on the Income Tax as an amendment
If transactions between such connected subjects are reflected in profits, the income tax bases of these subjects will be affected by analogy
Summary
In connection with the constant growth of globalization, transfer pricing is currently gaining more and more global importance. Thanks to multinational groups of companies, low-cost products can reach more economically efficient countries around the world, where companies strive to advance in innovation and innovative technologies with high competition (Sujianto, 2020). These phenomena have undeniably positive effects from a global perspective, but the fact that these groups of companies often abuse their position to shift profits from a higher-tax country to a lower-tax country, which will result in a negative economic effect for the affected countries (Solilova and Nerudova, 2013). The popularity of multinational companies does not always positively affect their goodwill. (Podhorska et al, 2019)
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