A number of terms are listed below:
Advance transfer price arrangement....... (APA) market-based price
Comparable uncontrolled price......... cost-based
Negotiated................. cost-plus
Cost-plus method (CPM)............ dual pricing
Goal-congruence................ profit split
Related-party transactions........... resale price
Tax haven.................. Transactional net margin
REQUIRED
Select the terms from the above list to complete the following sentences.
The CRA constrains global transfer-pricing choices and provincial tax authorities constrain the interprovincial transfer-pricing choice of management teams. A wise team will undertake an _______ ________ _____ ___________ (___) to avoid future tax liabilities. There are two interprovincial transfer-price alternatives when no ______ _____ _____ exists. The alternatives are either ____ _____, which is a cost-plus approach, or __________ transfer prices that fall between a market and cost-plus price. Of course a _________ price may be either full absorption or variable cost-based, and in the transfer the same company may use ____ _______. The transferring division charges at a cost-based price while the receiving division pays at a market-based price. The difference is billed to a common corporate account rather than to the divisions. This method reduces ____ __________ problems between transferring divisions. There are three multinational corporate transfer-price alternatives. The respective tax authorities scrutinize these _______ _____ ___________ very carefully to ensure their jurisdictions receive the appropriate tax payments from each party in the transfer. The alter- natives are the ___________ ____ _____ (CUP), ______ _____ (___), _________ (___),
_____________ (___) and _____________ ___ ______ _______ (____). In addition to negotiating APA with governments, corporations also minimize taxes by establishing legitimate subsidiaries in ___ ______ that share information with other governments.