TAX MATTERS: Drawing parallels, links between TP and VAT

Value Added Tax (VAT) and transfer pricing (TP) are largely viewed as two separate fields of tax. Adjustments to one area have limited and predictable consequences for the other area.
VAT is a transaction-based tax and it is levied on supplies of goods and services. A supply is taxable for VAT purposes if parties have agreed not only that the supply will be provided, but also what consideration will be paid in return for that particular supply.

This consideration will constitute the taxable amount for VAT purposes. TP sets the rules for transactions within related parties for corporate income tax purpose using the Arm’s Length Principle