Fuzzy Income Allocation of Multinationals : A Fuzzy Logic Concept For Transfer Pricing

The arm's length analysis of international transfer prices of multinational firms lacks a sound methodological approach of the so-called function and risk analysis. In practice, such analyses are of descriptive nature. 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 the multinational group. We illustrate our fuzzy logic approach by means of a simplified example