Multinational companies often use the mechanism of cross-border transfer pricing to set up multiple subsidiaries or affiliated companies within the group, conduct internal pricing transactions between these companies, and redistribute profits between countries with different tax rates to achieve the purpose of reducing the overall tax burden. The specific mechanisms include the following aspects: 1. Taking advantage of different tax rates: Multinational companies often have subsidiaries in different countries, and the corporate income tax rates of different countries are different. Companies can set up R&D, management or distribution centers in low-tax countries to concentrate more profits in these areas, while reducing book profits through internal transfers in production or sales departments in high-tax countries. For example, a multinational company can transfer core intellectual property or intangible assets to a subsidiary in a low-tax country, and then let other subsidiaries around the world purchase these intangible assets at higher royalties or licensing fees, thereby transferring profits to low-tax areas. 2. Pricing manipulation and internal transactions: In the process of internal product transactions, multinational companies can artificially set internal (transfer) prices for products or services. For example, if a production unit produces raw materials in a high-tax country and a sales unit sells finished products in a low-tax country, the company can set a lower internal price for the product, which reduces the profit of the production department and increases the profit of the sales department. Conversely, it is also possible to inflate profits at the front end of sales by raising the transfer price, so that the high-profit part appears in the low-tax area. The result of this is that the overall group profit is consciously redistributed globally according to the tax burden advantage. 3. Take advantage of pricing flexibility and complexity: Due to the complexity of market prices, cost factors, pricing methods and other factors, tax authorities may have certain difficulties in judging whether multinational companies have adopted real market pricing (arms-length principle). Multinational companies often take advantage of this and use internal audits, contract arrangements and valuation models to provide reasonable explanations for internal pricing, but in fact the pricing level has deviated from the independent market transaction price. In this way, companies can operate in marginal areas and achieve the effect of tax avoidance. 4. Tax treaty and regulatory arbitrage: Multinational companies may also take advantage of tax treaties and regulatory differences between different countries to conduct internal transactions and deposit profits in jurisdictions with looser regulations or tax havens, so that part of the profits are not or less taxed by high-tax countries. It should be pointed out that although this method of using transfer pricing to manipulate product prices to avoid taxes does exist in international trade, with the attention paid by tax authorities of various countries to the tax avoidance behavior of multinational companies and the advancement of the OECD Base Erosion and Profit Shifting (BEPS) project, relevant regulatory measures and information exchange mechanisms are being continuously strengthened. Countries have introduced stricter transfer pricing regulations, requiring companies to provide more detailed internal pricing documents and make tax adjustments for transactions that do not conform to the market price principle. Therefore, when conducting such cross-border tax planning, companies must carefully assess regulatory risks on the premise of legality and compliance to avoid being chased for taxes and fines due to price manipulation.