Please explain Transfer pricing to me and how it works?

[jorge]

I have a company in the UK, let's call it UK LTD, and then I have a company in Croatia, let's call it Croatia LTD, and my sales company is a US LLC.
I don't have to pay taxes in my US LLC, but where I reside, which is in Dubai.

What would a smart Transfer Pricing structure look like?

From what I understand, Croatia should manufacture the product for 100 EUR, sell it to the US LLC for 120 EUR, and the US LLC should sell it for 300 EUR to the UK LTD?

 

[Xshore]

Transfer pricing generally means that you should charge the same rates as you would to other non connected companies, or that other companies would have charged you. You might need to document how you determined the prices, the requirement for this documentation varies, as is quite substantial and complicated for bigger companies.

 

[icecold]

The tax offices are hunting down on transfer pricing models with small companies. You better get a tax expert to help you with the process before your business is based on transfer pricing.

 

[Xshore]

The tax offices are hunting down on transfer pricing models with small companies. You better get a tax expert to help you with the process before your business is based on transfer pricing.

However the UK does have an exemption for most small companies.
Not sure about what rewuiments Croatia has.