Transfer Pricing Contracts

Intercompany agreement (often referred to as ‘ICAs’) are legal agreements between related parties, such companies within a multinational group. They define the terms of intra-group transactions such as those relating to goods, services, intellectual property and loans.

ICAs are an essential part of Transfer Pricing documentation. Tax authorities expect to see them – and if agreements are missing, or are defective, then tax authorities will form their own conclusions as to the nature of the intercompany transactions. Those conclusions may not match your tax filings, and you can be exposed to unnecessary tax audits, fines and penalties.

ICAs must match the group’s Transfer Pricing policies, its actual business operations, and the way that it uses intellectual property, assets and finance. ICAs also need to reflect arrangements which make commercial sense from the perspective of each participating company. A defect in any of these aspects can undermine your tax and commercial objectives.

ICAs should be created and signed in advance – i.e. before the start of your group’s financial year. This is because agreements which are put in place retrospectively are unlikely to be fully effective. In practice, you’ll want to do this when you are confirming or updating your transfer pricing policies for the coming year.

It is still worth putting in place ICAs now, so that you are creating a consistent picture of your group’s intercompany transactions for the current year and future years.

Yes. Our firm can assist with transfer pricing contracts to suit your business operations.