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Intercompany agreements for transfer pricing compliance in regulated groups

Intercompany Agreements

5 October 2022

For regulated groups such as those in the financial services sector, regulatory considerations usually ‘trump’ transfer pricing optimisation. This is for obvious reasons: regulatory compliance is the ‘ticket to play', as non-compliance can be an existential threat.

Special considerations apply to intercompany agreements for these groups.

If a regulated entity procures services from another entity, this may be regarded as an ‘outsourcing’ arrangement, even if it’s intra-group. From a regulatory perspective, this means that the service recipient may require certain contractual controls, as illustrated in the slide below.

Unfortunately, this can result in a mess from a TP perspective.

We often come across intercompany agreements prepared by regulatory lawyers, without any regard to basic TP considerations such as pricing, risk allocation and ownership of marketing intangibles. And TP policies which bear no relationship to the group’s regulatory structure. Meaning of course that those TP policies are works of fiction, with no basis in reality.

The antidote is obvious: a joined-up, cross-functional approach. And TP policies which reflect the regulatory framework and which are legally implemented through appropriate intercompany agreements.

To achieve this, you need corporate lawyers who understand transfer pricing, and who can bridge the gap between the worlds of 'regulatory' and 'transfer pricing.'

That’s us.

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Article by
Paul Sutton
LCN Legal Co-Founder

Free Guide: Effective Intercompany Agreements for TP Compliance