TRANSFER PRICING AS A TOOL FOR FOR OPTIMIZING THE TAXATION OF MULTINATIONAL COMPANIES

Abstract

This article examines transfer pricing as a key mechanism for multinational companies to manage their tax liabilities by setting internal prices for transactions between subsidiaries in different countries. This practice ensures compliance with international tax laws while optimizing taxation rather than avoiding it. This study aims to analyze the types of business transactions that are considered controlled, to study foreign experience in the use and control of the transfer pricing mechanism, and to provide recommendations for Ukraine. The study emphasizes the importance of understanding the different transfer pricing methods, including the comparable uncontrolled price (CUP) method, resale price method, cost plus method, transaction net margin method (TNMM) and profit sharing method. Each method has specific guidelines and applicability, with the CUP method being particularly effective when comparable transactions exist in the open market. International guidelines, in particular the OECD guidelines, play an important role in regulating transfer pricing practices, emphasizing the arm's length principle to ensure fair distribution of tax revenues between jurisdictions. In response to concerns about tax evasion, Ukraine has introduced strict reporting requirements and international cooperation measures to increase transparency. The study concludes that effective auditing and enforcement are essential for tax compliance, and companies should apply transfer pricing best practices to mitigate risks. Recommendations include understanding the legal framework, maintaining accurate documentation, considering advanced pricing agreements (APAs) and regularly reviewing pricing strategies. It has been proven that a well-developed transfer pricing strategy is vital for multinationals to navigate tax legislation and optimize their financial operations.