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Keep it real: understanding legal ‘anchor points’

Intercompany Agreements

13 February 2023

The OECD’s TP Guidelines are very clear that intercompany transactions need to be assessed in the context of the legal and regulatory environment in which the relevant group entities actually operate. So the starting point in the creation of TP policies and documentation is to understand how the group actually works, commercially and legally.

One aspect of this is the legal ‘anchor points’, which are part of the objective reality of how the group interacts with the outside world. They are fixed, unless the group changes its operating model.

The slide above gives a few examples, such as:

  • Ownership of registered IP
  • Ownership of unregistered IP
  • Purchase of raw materials from third party suppliers​
  • Sales contracts with customers (ie which group entities enter into these contracts​)
  • Regulatory licences or approvals

For the documentation to be meaningful, intercompany transactions will need to be ‘mapped’ onto the relevant anchor points. This precedes the choice of TP method, and any benchmarking or comparables. If this mapping is not done correctly, any TP policies will be a work of fiction, because they will have failed to delineate the ‘actual transactions’ concerned.

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Article by
Paul Sutton
LCN Legal Co-Founder

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