Intercompany agreements are fundamentally different from third-party contracts (also known as commercial contracts). An intercompany agreement is signed by two companies that are part of the same group. Presumably they have the same objective: to increase the group`s result. They have the freedom to arrange the transaction as they see fit, and it is unlikely that there will be an argument. On the face of it, the Intercompany agreement is a formality. In our course, we offer a more detailed description of these requirements. We reiterate that the content of the intercompany contract should be consistent with the three principles discussed above. Intercompany agreements can cover different controlled transactions. Below, we present a common overview: the development of an intercompany agreement is the best way to proceed with a multidisciplinary approach. Tax and financial experts develop transfer pricing documentation, but may not have the expertise to establish legal documents.
Similarly, lawyers are generally in the dark about transfer pricing rules. It is therefore important to ensure that the right people and skills are on board. Because companies do not benefit from internal transactions, it is necessary for companies to define and document potential internal transactions. The purpose of an intercompany agreement is to document transactions between departments or subsidiaries of a company, so that the parent company or organization can make decisions based on established financial results. It also contributes to compliance with laws and regulations such as Section 482 of the IRS and OECD BEPS tax code, as well as to the sharing of risks and responsibilities. These agreements are designed to be valid in countries around the world. They contain all the key elements of the treaty`s validity. Intercompany Agreements (ICAs) are documents used to define how sales or transfers of goods and services are made by companies in the same company. Similar agreements include intercompany notes and intercompany service agreements.
With regard to the content of intercompany agreements, we highlight three key principles: transfer pricing agreements between associated companies must be formalised in intercompany agreements in order to make them legally binding, to comply with transfer pricing legislation and to ensure an appropriate line of defence against the challenges posed by tax authorities. If you don`t, your business is seriously and unnecessarily threatened. The tax authorities are not convinced that Pierre Plastic complies with transfer pricing laws. It intends to examine (i) whether the allocation of risks, assets and functions on which transfer pricing agreements were based is consistent with actual agreements and (ii) whether the associated companies have agreed to the transfer pricing agreements.