Round trip transaction

A round trip transaction occurs when goods, services, or funds circulate among entities within the same corporate group, often without creating genuine economic value. In taxation, this setup can raise transfer pricing issues if, for instance, a parent company transfers its intellectual property—such as patents, trademarks, or technology—to a related manufacturer based in a lower-tax country, which then sells the finished products back to the parent firm for resale. These arrangements can effectively reallocate profits to the low-tax location while reducing the taxable income in the high-tax jurisdiction, even though all the activity remains within the same multinational group.

Example: A British company licenses its trademark to an Irish subsidiary that manufactures branded products and later sells them back to the U.K. parent for global sales. Even though the trade occurs within the group, the setup enables profits to be booked in Ireland—a lower-tax country—drawing attention from tax authorities under transfer pricing regulations.