Transfer pricing is the general term for the pricing of intrafirm transactions between related parties. It is believed that two or more entities or individuals are related parties when one participates directly or indirectly in the administration or control or capital of the other, or when a person or group of persons participates directly or indirectly in the administration, control or capital of such persons.

The purpose of the transfer pricing studies is to provide assurance that the operations between related parties meet the armslength principle; that is, that a transfer price would be the same as if the two companies involved were indeed two unrelated parties negotiating in a normal market, and not part of the same corporate structure.