Kata Inc. is a U$.$S$.$ company which owns and operates a subsidiary manufacturing facility in Thailand $($ThaiKata PLC$).$ The product is imported from Thailand into the U$.$S$.$ through two distribution channels. In the primary channel, Kata Inc. distributes the product through their network of independent dealers. However, ThaiKata has excess capacity and sells some product direct to competing U$.$S$.$ distributors. Because ThaiKata is a subsidiary of Kata Inc., the $$sale$$ of product to Kata Inc. creates a transfer price situation.

In international transfer pricing situations, numerous factors such as allowable transfer pricing methods, domestic and foreign income taxes, import duties, withholding taxes, and foreign income tax credits play a role in determining an appropriate and beneficial transfer price.