Posted on October 12, 2021
In other cases, it may not be possible to say that the agreement in question was already in force, but it may nevertheless be desirable to achieve a “retroactive” effect. In this situation, it may be possible to conclude an agreement now with a historic “effective date”. For example, a group may move from a merchandise sales model (in which local subsidiaries own or acquire the right to market the products in question and sell them to customers who bear a commercial risk) to an agency model (in which local subsidiaries only act as initiation agents and do not take any credit or other commercial risks when selling the products). The seller/client may agree with the local distributors to process the agreements as they have existed since the end of the previous year. This could mean the conclusion of agency contracts, which are dated when they are actually signed. Agreements could, inter alia, provide for a distribution of revenue and risk by reference to the historical date of entry into force, adjusting payments accordingly. This type of agreement would not bind third parties, but it can be effective from an accounting and tax point of view, depending on the time elapsed since the historical expiry date. Essentially, intercompany agreements can be structured in three ways: with regard to the content of intercompany agreements, we highlight three key principles: most transfer pricing experts agree that intercompany agreements can play an important role in supporting a multinational`s transfer pricing policy. They allow the tax function to define the starting point for discussions with local tax authorities on deliveries made within the group and under what conditions. In some legal systems, true-up adaptations after the end of the year are only permitted if they are made in accordance with a legal agreement in force at the beginning of the year in question. Finally, inter-Contractual agreements must be legally binding.
From an English legal point of view, it is not difficult to achieve this, as there are few formal requirements. (Notable exceptions are ground transportation, leases, warranties, and documents that give powers.) However, the key terms of the agreement must be `legal certainty`. This applies in the first place to the description of the delivery and the price of the delivery, so that these provisions must be objectively achievable on the basis of the contractual conditions. If you need transfer pricing intercompany agreements for your controlled transactions, we have something for you. Intercompany agreements are particularly important for intangible assets agreements. Item 67 of the revised OECD draft discussion on transfer pricing aspects of intangible assets, published on 30 July 2013, states that “statutory rights and contractual arrangements are the starting point for any transfer pricing analysis of transactions involving intangible assets. It is therefore a good practice for related enterprises to document their decisions and intentions with respect to the allocation of substantive rights in intangible assets. * Determine what types of intercompany agreements are currently in use within the group and whether they need to be updated. * Examine which intra-group supplies would benefit most from intra-group arrangements to support the group`s transfer pricing objectives. * Select the appropriate contract template (e.g.B. global agreements, bilateral agreements, hybrid, contract plan/standard terms).
* Define clear responsibilities for the creation and maintenance of appropriate templates, the establishment of signatures and the archiving of signed intercompany agreements. * Beware of proposals for “backdate devices”. Among the conditions generally covered by intercompany agreements are: intercompany agreements are fundamentally different from third-party contracts (also known as commercial agreements). An intercompany contract is signed by two companies that are part of the same group.. . . .