This article appears in the October issue of our International Corporate Structures Newsletter.
“Importantly, ex ante contractual assumption of risk should provide clear evidence of a commitment to assume risk prior to the materialisation of risk outcomes. Such evidence is a very important part of the tax administration’s transfer pricing analysis of risks in commercial or financial relations, since, in practice, an audit performed by the tax administration may occur years after the making of such up-front decisions by the associated enterprises and when outcomes are known.”
OECD Transfer Pricing Guidelines for Multinational Enterprises and Tax Administrations, 2017 edition, p 63 (emphasis added)
Intercompany agreements are an essential part of transfer pricing compliance documentation. But transfer pricing is by no means the only driver. Intellectual property enforcement, the General Data Protection Regulation (GDPR), corporate governance, ring-fencing of liability risks and other regulatory requirements may all trigger a need for intercompany agreements. Unless tax functions pro-actively engage with legal functions and the group as a whole, the group’s transfer pricing position may be undermined by agreements which do not take into account tax compliance objectives.
LCN Legal has produced a special report to help tax functions engage with legal colleagues on this issue. It’s an essential briefing on transfer pricing compliance for legal counsel, and includes:
- Selected extracts from the 2017 edition of the OECD Transfer Pricing Guidelines, illustrating the role which legal analysis and documentation plays in transfer pricing compliance
- A two-page executive briefing on transfer pricing for legal counsel
- A simplified case study illustrating a typical flow of intra-group supplies and related intercompany agreements
- A checklist of the main areas of legal input required for transfer pricing compliance
- General principles for the preparation and implementation of intercompany agreements
- An in-house tax view: ‘Are intercompany agreements really necessary?’ by Ian Barron
- A list of additional free resources from LCN Legal
To request your free copy, click here.