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. On the other hand, a third-party agreement is the result of negotiations on CT by two independent companies that protect their own interests. Normally, such an agreement is carefully crafted and reviewed before being accepted by both companies. It is unlikely that any of the parties would be able to unilaterally dictate the CT of the agreement. These agreements are designed to be valid in countries around the world. They contain all the key elements of the treaty`s validity. Nevertheless, there are essential requirements to include in each intercompany contract: the following example shows what can happen without a transfer pricing agreement: a business-to-business service agreement in accordance with transfer pricing. Properly formalize all your business-to-business services.
There is not a single requirement that applies to all transfer pricing agreements in all jurisdictions. Even the OECD does not provide specific guidelines on what information to include in transfer pricing agreements. It makes sense. Its guidelines are aimed at countries around the world that have different legal systems and priority areas. 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 main ones: 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.
If you buy all these transfer price agreements today, you get a 50% discount on the whole package! The documentation of transfer pricing documentation is supported by transfer pricing agreements. However, it is not legally binding. Intercompany agreements will help you formalize transfer pricing agreements in a legally binding contract between related companies. It is important to ensure that intercompany agreements respect reality, comply with transfer pricing documentation and comply with market standards. Intercompany agreements can cover different controlled transactions.