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. The regular introduction and updating of intercompany agreements can be a complex and costly process. Transfer pricing agreements between associated companies must be formalised in intercompany agreements in order to make them legally binding, to comply with transfer pricing legislation and to ensure an appropriate line of defence against the challenges posed by tax authorities. If you don`t, your business is seriously and unnecessarily threatened. Companies with multiple divisions can benefit from intercompany agreements because they are able to transfer goods and services to a location in the company that will benefit the most, with no negative tax results. In addition, by separating transfers of goods and services resulting from intercompany agreements resulting from other transactions, they are able to help the company and its activities interpret and analyze inventory and sales information more effectively. Intercompany agreements are contracts between two or more companies or divisions that are owned by the same parent company. It is a contract for internal transactions of sales or transfers of goods and services between companies. The reason for an intercompany agreement is to address certain factors of the parent company in collaboration with the two divisions of the same company. Taxpayers should also be particularly aware of whether their intercompany agreements consider how risks are distributed among companies in exceptional circumstances. Even if such agreements exist, they are often poorly drafted, incomprehensible and obsolete and do not reflect the commercial reality of the group`s functioning.
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. 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. Finally, intercompany agreements must be legally binding, which means that the main provisions of the agreement must have ”legal certainty”. Companies are not able to take advantage of intercompany sales. It is therefore expected that the companies or departments of a parent company will pay for intercompany transactions by a specific method. The purpose of the intercompany agreements is to define how transfers take place and to determine, on the basis of financial results, what measures are needed for all parties involved. The value of an intercompany agreement often only appears when things go wrong, which is why they are essential, says the expert Legal agreements should reflect an agreement that the directors of each participating company can duly approve to promote the interests of that company. This means that some proposed regulations can be problematic – such as agreements in which a particular company would suffer ongoing losses; are subject to liability or cash flow requirements that it does not have the financial means to fill or ”give” assets or value, especially when it is a parent company. These terms are among those that should be specifically evaluated to ensure that form and substance are consistent, particularly given current economic volatility. For example, when it comes to intercompany transactions, do related companies make payments in a timely manner? Do they need fewer units than has been agreed? Are ancillary services no longer provided? Do they still have the financial capacity to offer credit terms? Has the Commission