Nevertheless, there are basic requirements that must be incorporated into each intercompany contract: 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. Apple`s Shared Services Center in Manila provides administrative services to Apple Hong Kong and Apple China. 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. The best way to develop an intercompany agreement is to take 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. 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. Intercompany agreements are contracts between two or more companies or divisions that are owned by the same parent company. It is a contract for internal transactions of sales or transfers of goods and services between companies. The reason for an intercompany agreement is to address certain factors of the parent company in collaboration with the two divisions of the same company. The tax authorities are not convinced that Pierre Plastic complies with transfer pricing laws.