Q: What is the ICA Toolkit?
A: It’s a set of template intercompany agreements for transfer pricing compliance, which covers the most common intercompany transaction types. The templates have been developed by the senior lawyers at LCN Legal over a number of years, based on their experience of working with multinational groups worldwide.
Q: What’s the difference between an ‘intercompany agreement’ and a ‘transfer pricing agreement’?
A: They are the same thing. We call them ‘ICAs’ for short, but they’re sometimes also referred to as ‘related party agreements’.
Q: Do you have a list of the intercompany transaction types for which are included in the toolkit?
A: Yes, you can see the full list here.
Q: What kind of functionality do your template intercompany agreements provide?
A: The template agreements provide the functionality needed to reflect different TP methods (e.g. cost plus arrangements with allocation keys, TNMM remuneration for limited risk distributors etc). The templates also allow for bilateral and multilateral agreement formats, where applicable, as well as true-up and true-down adjustments. Importantly, the templates also provide suggested drafting approaches to achieve ‘legal certainty’.
Q: Why is ‘legal certainty’ important?
A: In general terms, ‘legal certainty’ on the key terms (such as price) is important in order for a legal contract to exist at all. And you can’t achieve a ‘contractual allocation of risk’ (as referred to in the OECD’s TP Guidelines) without a legal contract.
Q: How long are the agreements included in your ICA Toolkit?
A: Each agreement is generally around 7 to 8 pages long, usually with a ‘contract schedule’ at the front, with additional standard terms at the back. We’re passionate about avoiding overly long, legalistic agreements, because they are unlikely to be read by the key stakeholders within the group, and they are unlikely to reflect arrangements which the group can follow in practice.
Q: Are the template agreements just for very large corporate groups?
A: No, they are also suitable for mid-tier and smaller groups too, as long as they have international operations and need to manage transfer pricing risks.
Q: What kinds of people can use the templates?
A: The templates are intended for use by people who are used to handling legal documents, and are comfortable adapting the templates to fit the relevant groups. Obviously this includes in-house legal teams and company secretarial professionals. However, many finance, tax, and transfer pricing professionals are very used to reviewing and commenting on legal agreements. The people and organisations who buy our toolkit include lawyers and non-lawyers.
Q: Which jurisdictions does your ICA Toolkit cover?
A: The template agreements can be used and adapted for all jurisdictions. They include ‘governing law’ clauses which related to English law (because in general, English law is non-prescriptive, and ‘what-you-see-is-what-you-get’. But the templates can easily be adapted for other applicable laws if preferred.
Q: What’s the difference between your ICA Toolkit and your document automation platform for ICAs?
A: The toolkit consists of template documents in Microsoft Word format. They give you a solid starting point, so that you can then tailor the agreements for your group yourself. Our document automation platform consists of a series of online questionnaires for specific transaction types, which enables you to tailor the agreements much faster, and does not require any legal knowledge. We call it our ‘document automation’ ICA drafting service, and you can find the details here.
Q: How often are your ICA templates updated?
A: We tend to update the templates every 6 months, and we add new templates on an ad hoc basis.
Q: Are there ‘light’ versions of agreements vs very detailed versions?
A: As already mentioned, our philosophy is to keep our templates as brief as possible, while covering the functionality required for TP and legal purposes. We regard overly detailed intercompany agreements as a risk factor, as they are unlikely to be followed in practice, and need to be revised more frequently. So we don’t publish ‘long’ and ‘short’ versions of each template.
Q: How much does the ICA Toolkit cost?
A: GBP 4,050 (plus VAT if applicable).
Q: Can I just buy a template agreement for one specific transaction type?
A: Yes you can. The cost for a single template agreement is GBP 5,200 (plus VAT if applicable).
Q: Are you lawyers? Or are you transfer pricing advisers? I’m confused!
A: We are corporate lawyers by background, and we just happen to have worked in the transfer pricing space for a number of years (since 2001, in fact). Although we’re fascinated by the challenge of transfer pricing compliance, and we regularly attend transfer pricing and international tax conferences, we’re not TP advisers. Our services and tools complement and implement the work of TP advisers, not replace them.
Q: How can I buy your ICA Toolkit?
A: You can order online here.