Backdating intercompany agreements – what the OECD’s TP Guidelines say

“Nothing is so fatiguing as the eternal hanging on of an uncompleted task.” – so said William James, the American philosopher. It definitely rings true for me, whenever I find the same task on my to-do lists, from one week to the next, or from one month to the next.

One reason why people put off putting in place intercompany agreements to support their transfer pricing compliance, is that they think they can deal with them as and when they are required as part of a tax audit. But there are two problems with this: firstly, doing this kind of thing in a hurry is never a great idea, and just invites error. Secondly, the effect of ‘backdated’ agreements is questionable. Here’s what the OECD’s 2017 Transfer Pricing Guidelines say about backdating intercompany agreements:

“The purported assumption of risk by associated enterprises when risk outcomes are certain is by definition not an assumption of risk, since there is no longer any risk.”

It's not difficult to get your compliance in shape. As with most things in life, the most important thing is to get started.

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