Multinational companies using transfer prices en¬ counter difficulties including

• differences in tax systems, customs duties, freight and insurance costs, import/export regulations, and foreign-exchange controls.

• the ability to determine what transfer price would be considered “reasonable” as though generated in an arm’s-length transaction.

• the increase in transfer pricing audits by tax au¬ thorities.

• the process of having an advanced pricing agree¬ ment approved by appropriate tax authorities. LO.1