engleski

Regulation of transfer pricing in Croatian banking industry

The globalisation process and increased international capital mobility have influenced the need for regulation of transfer pricing, since they indirectly support profit shifting to regions with more liberal tax rates. The application of transfer pricing not only questions the business efficiency of the parties involved, but it may also exert a considerable influence onto reduction of internal tax revenue within the country where the related parties are doing business, making thus the problem of economic distortion even more interesting. This paper illustrates all the traditional and modern transfer pricing methods available to business subjects and offers a short description of forming prices according to each of these methods. Then follows a summary of transfer pricing regulation in Croatia, indicating which of the reviewed methods have been recommended by OECD, i.e. what is their status in the EU. The example of Croatian banking sector, which was a logical choice due to the majority share of international capital in it, has served as the basis for research on the most acceptable transfer pricing methods. The results obtained from this research should serve as the basis for further elaboration and analyses of the influence of the chosen transfer pricing method onto business profitability of a particular business subject, i.e. economy as a whole.

transfer pricing methods; banking sector; cost and profit shifting

S.I. CIRCLE Conference.