An intercompany agreement (also known as an “intragroup agreement” or “transfer pricing agreement”) is a (signed) contract between two or more related companies. This contract governs the terms (CG) of controlled transactions, such as the provision of goods or services from a company linked to another associated company. Intercompany agreements are particularly important for intangible capital agreements. In point 67 of the OECD`s revised discussion on intangible capital transfer pricing of July 30, 2013, it states that “legal rights and contractual agreements are the starting point for any analysis of transfer pricing of transactions involving intangible assets … It is therefore good practice for related companies to set out in writing their decisions and intentions with respect to the allocation of significant rights to intangible assets. One day, the tax authorities knock on the door to find out about transfer pricing rules and their documentation. Pjotr Plastic informs them that there is documentation on transfer pricing, but there are no intercompany agreements proving that all related companies have approved transfer pricing agreements. In other cases, it may not be possible to say that the corresponding regulations were already in place, but it may nevertheless be desirable to achieve a “retrodated” effect. In this situation, it may now be possible to reach an agreement with a historical “effective date.” For example, a group may move from a property sales model (where local subsidiaries hold or acquire the legal personality of the products concerned and resell them to commercial risk customers) to an agency model (in which local subsidiaries act only as introductory intermediaries and without credit or other commercial risks when selling the products). The seller/order giver may agree with local distributors to process the agreements as they had been in force since the end of the previous year. This could involve the implementation of dated agency agreements if they are actually signed. In particular, the agreements could provide for the distribution of revenues and risks by reference to the historical date of entry into force, adjusting payments accordingly.
This type of agreement would not bind third parties, but it can be effective from an accounting and fiscal point of view depending on the time elapsed since the historically forecast date. If you need price-compliant intercompany agreements for your controlled transactions, we have something for you… Nevertheless, there are essential requirements to be included in each intercompany contract: although it is easier to implement, global agreements have a disadvantage in making it more difficult to respond to the specific requirements of local jurisdictions without disclosing the “special regime” to all relevant tax authorities. As with any intragroup agreement, the introduction of internal agreements should respect the obligations of the directors (or equivalent senior managers) of each agency participating in the agreements.