What Is An Intercompany Agreement

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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 (ICAs) describe the legal terminology that provides financial support, products and services within a group. ICAs can cover a wide range of situations, including back office and head office services, cost and revenue allocation, intellectual property licenses, etc. It has been recognized that intercompany agreements are a fundamental element of the respect of transfer pricing and the use of the management of the OECD (Organisation for Economic Co-operation and Development), beps (Base Erosion and Profit Shifting) by an increasing number of countries each year. This particular importance is monumental only for financial institutions and multinational companies. We see many intercompany agreements for which no price is indicated or the price is determined by a vague indication of comparable net sales or profits of the subsidiary. This approach may raise questions related to legal security and transfer pricing compliance. 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. The terms of the intercompany agreements must be consistent with the legal and economic ownership of the relevant assets and the commercial reality of intragroup transactions. For example, an intragroup agreement in which a company claims to grant an intellectual property license that it does not actually have can create confusion and misleading accounting entries, rather than promoting transfer pricing and other business objectives of the group. 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. Here you will find an overview of our current range of services on intercompany agreements for multinationals.

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.