This model is part of the LCN Legal “Toolkits” of practical resources and intercompany agreements to facilitate the conclusion of intercompany agreements to support their transfer pricing compliance by companies and transfer pricing experts. For more information about the toolkit, click here. 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. Without intercompany agreements, Pjotr Plastic must now provide further evidence and convince the tax authorities that its transfer pricing position is in fact what it claims – potentially a lengthy and costly discussion. It could have been avoided… In practice, companies often neglect contractual obligations between companies. And even when intercompany agreements are concluded, they are often poorly drafted, obsolete and do not reflect the economic reality of controlled transactions. The lack of intercompany (quality) agreements can be a risk for many reasons. These are the three most important: an inter-partnered agreement defines the form of a transaction and the obligations of the parties.
Support for a future argument against the re-characterization of transactions by a tax authority is often found in an intercompany agreement. The starting point of the agreement is the result of an analysis of the comparability of transactions. A well-developed agreement contains clauses that reflect the list of comparability factors in most national tax laws and administrative guidelines. The models are intended to complement the work of transfer pricing experts in the development of appropriate transfer pricing policies for business groups – not to replace them – as well as functional analysis of relevant activities and similar research. LCN Legal does not offer tax or comparable advice. With regard to the content of intercompany agreements, we highlight three key principles: signed copies of all agreements are stored in a centralized and scalable repository, which facilitates the conclusion of agreements for documentation purposes. It is important to ensure that intercompany agreements respect reality, comply with transfer pricing documentation and comply with market standards. Apple Austria transfers its shares and customer list to Apple Germany. The content of intercompany agreements depends largely on the nature of the controlled transaction and the jurisdictions in which the controlled transactions take place. Complex controlled transactions, such as the licensing of intellectual property. B require detailed contracts. Contracts for simple controlled transactions, such as the provision of administrative services, are.
B can be maintained easily. As with any agreement that governs a complex transaction, an inter-partnered agreement should be developed or reviewed by a lawyer. While intercompany agreements do not replace the detailed information contained in transfer pricing documentation and are not mandatory in many cases, they are another instrument that companies should use to manage transfer pricing aspects of international transactions with related companies.