In practice, companies often neglect inter-company contractual obligations. And even when intercompany agreements are concluded, they are often poorly formulated, obsolete and do not reflect the economic reality of the controlled transactions. The absence of (quality) intercompany agreements can pose a risk for a variety of reasons. Here are the three most important: draw attention to intra-company transactions in your company that may be subject to an intercompany agreement. You can quickly launch new contracts and sign them with just a few clicks. Warnings detect the expiration of contracts to avoid gaps in coverage. The U.S. Treasury Regulations define the terms of the contract that must be considered when comparing controlled and uncontrolled intercompany transactions. These conditions are also important if you design (or update) an intercompany contract and include: intercompany contracts remain a fundamental element of transfer pricing compliance; Whether or not it is a period of crisis, they must be consistent with the behaviour of the parties involved. Since the activities and risks borne by related undertakings and persons with related entities may change during this uncertain period, it is essential that taxable persons consider whether to amend any of the terms of their intercompany contracts (to the extent permitted by law). This article provides a framework for growth and questions about intercompany agreements.
It should be ensured that intercompany agreements correspond to reality, respect transfer pricing documentation and comply with market standards. The following example shows what can happen without transfer pricing agreements: this distinction, especially with regard to timing, is important. In accordance with US financial regulations and the OECD Guidelines, the allocation of risks between supervised subjects is subject to a reasonable lack of economic substance based on the outcome of such a risk. If a risk is known, there is no longer any risk to consider. Amendments to business-to-business agreements should therefore be made as soon as possible in order to comply with the conditions. The task of maintaining an effective system of intercompany agreements often falls between two chairs: tax and financial professionals can be blamed for unexpected tax impositions resulting from transfer pricing challenges, but usually do not have the ability to handle legal documentation. Similarly, many in-house lawyers are not familiar with transfer pricing concepts and may not have practical experience with the issues associated with them. Even if such agreements exist, they are often poorly formulated, incomprehensible and obsolete and do not reflect the commercial reality of the group`s functioning.
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