Fuzzy Transfer Pricing World: On the Analysis of Transfer Pricing with Fuzzy Logic Techniques

Abstract

The arm's length analysis of international transfer prices of multinational firms lacks sound methodological approach of the so-called function and risk analysis. In practice, such analyses are descriptive. Derived from Zadeh's mathematical theory of fuzzy sets, this paper investigates a quantitative approach to identify the function and risk pattern of related parties of multinational companies. We illustrate our fuzzy logic approach with a simple case.

Keywords: Function and risk analysis, fuzzy logic theory, multinational company, transaction costs, transfer pricing

JEL Classification: C69, D49, L29, M21