The ‘Steve Jobs’ strategy for Transfer Pricing agreements

We recently hosted a private discussion group for heads of tax, heads of TP and CFOs of multinational groups. The focus was on intercompany agreements tor TP compliance. One view, which appeared to be shared by many, was that lawyers often get in the way of effective group structures and transfer pricing agreements. This was not due to any lack of diligence on the part of the lawyers – but the accusation was that they tend to (1) overcomplicate the legal documents by adding too many ‘bells and whistles’, and (2) spend huge amounts of time redrafting each other’s work.

The result was that projects which should have been completed in a few weeks ended up taking months and months. And the resulting legal documentation was so unwieldy that no right-minded person would ever read it – meaning that it would be likely to be wrong.

The antidote is to take the Steve Jobs approach of insisting on simplicity and clarity. Here is one of his quotes on the subject:

“Simple can be harder than complex: You have to work hard to get your thinking clean to make it simple. But it’s worth it in the end because once you get there, you can move mountains.”

If you would like to follow a similar approach with your transfer pricing agreements, you will probably find our template intercompany agreements helpful. You can read more about them here.