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Chapter 3

2.4 Inter-company cash flows

Inter-company cash flows, such as transfer prices, royalties and
management charges, can also affect the tax computations.

 Assume inter-company cash flows are tax allowable in the
foreign country.

 If the inter-company cash flow is tax allowable in the foreign
country, there will be a corresponding tax liability on the income
in the home country.

 NB. Tax authorities will only allow ‘arm’s length’ prices to be
charged.

Illustrations and further practice

Now try Illustration 4 in Chapter 3

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