Siirdamishinna

Siirdamishinna is a term originating from Estonian and translates to "transfer price" in English. It refers to the price set for the transfer of goods, services, or intangible assets between related entities within a multinational enterprise or between independent companies under common control. These transactions, often occurring between parent companies and their subsidiaries, or between different subsidiaries, are subject to scrutiny by tax authorities.

The primary purpose of regulating siirdamishinna is to ensure that taxable profits are reported in the correct jurisdictions and to prevent artificial profit shifting. Tax authorities use the arm's length principle as the benchmark for determining whether transfer prices are appropriate. This principle dictates that the price charged in a transaction between related parties should be the same as if the transaction had occurred between independent parties dealing at arm's length.

Various methods can be used to establish arm's length transfer prices, including the comparable uncontrolled price method, the resale price method, the cost plus method, the transactional net margin method, and the profit split method. The choice of method depends on the nature of the transaction and the availability of comparable data. Companies are required to document their transfer pricing policies and calculations to demonstrate compliance with tax regulations. Failure to adhere to these regulations can result in adjustments to taxable income, penalties, and interest charges.