Want to know what is transfer Pricing?

Have you ever heard of the term "Transfer Pricing"? It sounds serious, like a signature move in an action movie. But hold on, let’s keep it chill while sipping tea and snacking on fried bananas, so we don’t get as tense as watching a cat cross a bamboo bridge!

So, imagine you have two kids: Generous, the kind-hearted one, and Frugal, the super thrifty one. Generous has a company in Indonesia, let’s call it PT. Yummy Fried Bananas. Meanwhile, Frugal owns a company in a neighboring country, let’s call it Sdn Bhd. Cheap Bananas.

Still following? Now, "Transfer Pricing" comes into play when the price of bananas sold between these sibling companies is different from the market price. For instance, if the market price for bananas is IDR 10,000/kg, Frugal might sell them to Generous at IDR 20,000/kg! Whoa, isn’t that too much?!

What’s the goal? Well, of course, to reduce the profits of PT. Yummy Fried Bananas, which means the tax owed to the government also gets smaller. It’s like you’re on a strict diet but secretly snacking on chocolate behind the door!

Now, if this "Transfer Pricing" trick goes too far, it could be classified as tax avoidance. What’s the punishment? You could face heavy fines, or even worse, have to deal with tax authorities! Scary, right?

"Transfer Pricing" is like a magic trick, shifting profits from one company to another in a different country. If done properly and within the rules, "Transfer Pricing" is perfectly legal. It’s like sharing snacks with your neighbors—totally fine! But if the intent is to cheat on taxes, get ready for nightmares of being chased by tax officers!