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. International CFOs should ensure that legally binding intercompany agreements exist and that transfer pricing risks are minimized. If this is not the case, it is comparable to allow the tax authorities to access the group`s bank accounts so that they can withdraw what they deem to be right. Intercompany agreements are legal agreements between related parties. They define the legal conditions under which services, products and financial support are provided within a group. However, many groups do not have a consistent approach to establishing and maintaining intercompany agreements. In some cases, no intercompany agreement is reached. In other cases, agreements are heavily influenced by trade agreements with unrelated third parties, with the result that they are too long, quick to verify and contain contractual procedures that, at best, are untapped and, in the worst cases, directly contradict the way agreements are managed in practice. Companies often believe that the relationship between companies within a group is unlikely to be tested and has therefore failed to invest in clear and legally sound intercompany agreements. With regard to internal group procurement, relevant intercompany agreements must, of course, be in line with the group`s transfer pricing policies with respect to the nature, conditions and pricing of the supply. Other common errors are overly complex agreements without reconciling ownership and operation of intellectual property, not adequately reflecting group structures, failing to guard against inappropriate termination provisions, and neglecting the importance of making arrangements for the distribution of costs among multiple recipients of services.

Ti has an excellent process, but many multinationals (NCMs) need to define a more precise process and fill in the gaps. Given all the new requirements imposed on NMCs in a short period of time, it is important that they spend time assessing and preparing. With respect to intercompany agreements, this would be tantamount to reviewing the agreements already concluded and ensuring that they are in line with the latest economic analysis and transfer pricing policy. It also means ensuring that agreements are archived in an easily accessible location.