Intercompany Agreements

Intercompany agreements don`t have to be complicated, they have to be simple for stakeholders to fully understand them. But like everything else, they need to be properly planned and implemented. Keep your attention on intercompany transactions in your business that may be subject to an intercompany agreement. You can quickly launch new contracts and prepare them for signature with just a few clicks. Identify warnings when contracts expire to avoid coverage loopholes. Intercompany Agreements (ICAs) describe the legal terminology for which financial support, products and services are provided within a group. ICAs can cover a wide range of situations, including back office and head office services, cost and revenue allocation, intellectual property licenses, etc. It has been recognized that intercompany agreements are a fundamental element of the respect of transfer pricing and the use of the management of the OECD (Organisation for Economic Co-operation and Development), beps (Base Erosion and Profit Shifting) by an increasing number of countries each year. This particular importance is monumental only for financial institutions and multinational companies.

Signed copies of all agreements are stored in a central and ardent repository, making it easier to establish agreements for documentation purposes. According to the OECD GUIDELINEs on BEPS, multinational companies must establish a list of key intercompany agreements (ICAs) to support documentation and tax positions in global tax administrations regarding transfer pricing. The following example shows what can happen without a transfer pricing agreement: whether it is changing the terms of an existing intercompany contract or developing conditions for a new contract, consider the taxpayer`s agreements with third parties and whether there have been any recent changes. To the extent that the terms of payment have been extended, prices have been renegotiated, etc., these amendments can provide market proof of the length of conditions that the taxpayer intends to introduce (and support) in its intercompany agreements. We see many intercompany agreements for which no price is indicated or the price is determined by a vague indication of comparable net sales or profits of the subsidiary. This approach may raise questions related to legal security and transfer pricing compliance. While the tax reasons for properly developed intercompany agreements are sufficiently compelling (in many years, HMRC is networking well over a billion pounds of additional taxes from price transfer applications), there are also non-pilots.