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Quick-start workshops for revising your group’s Transfer Pricing agreements

Intercompany Agreements

21 July 2020

I’ve lost count of the number of transfer pricing articles I’ve read over the last couple of months which tell their readers to “review your transfer pricing policies” and “update your intercompany agreements” in the light of recent economic circumstances. This is undoubtedly good advice.

The problem is that few TP or tax professionals know how to analyse or write legal agreements, and even fewer commercial lawyers have an understanding of transfer pricing. So it’s no surprise if the result is often a mess: agreements which make no sense in the context of the group’s legal structure, and which don’t match their TP compliance policies.

Increasingly, we are receiving reports that local tax inspectors are carrying out a line-by-line review of transfer pricing agreements, and using discrepancies between those agreements and the stated transfer pricing policies to challenge positions taken. In addition, tax administrations such as the Australian Taxation Office appear to be recommending that taxpayers consult them prior to the implementation of changes to intercompany agreements in response to the pandemic.

We’ve thought hard about how we can provide the best possible value for money for multinational businesses which need to take action on their TP policies now, and which (understandably) want to utilise their in-house legal capacity as much as possible.

Here’s what we’ve come up with:

A package of 4 quick-start workshops, to facilitate a practical, achievable plan of action for the legal implementation of the required changes to intercompany agreements.

Because intercompany structures need to work from a holistic, multi-disciplinary perspective, it is essential to have the right people in the (virtual) room, and to bring together representatives of the key in-house functions involved (e.g. tax, finance, legal, compliance and risk).

The workshops are facilitated as live video calls, which are designed to help the group’s in-house project team plan and carry out the required work as efficiently as possible, and avoid common pitfalls (such as agreements with missing or inappropriate functionality for allocating risk).

Workshop 1: Scoping (online, 50 minutes)

  • High level review of the group's existing TP policies and identification of the changes that may be needed from a TP, governance and operational perspective
  • High level review of the key transaction types involved from a legal perspective, the accounting treatment of relevant transactions and the legal entities affected
  • Identify other stakeholders both within and outside the group that need to be consulted
  • Identify additional information and documentation needed
  • Agree the specific actions which the group's internal team needs to complete before the next workshop

Workshop 2: Review of current status (online, 50 minutes)

  • Review of analysis of existing legal structure, the current TP documentation and any existing intercompany agreements in place
  • Detailed review of extent of changes needed, or whether the existing agreements already provide sufficient flexibility (e.g. in definitions of ‘cost’ or scope of services)
  • Consideration of the components for an outline transition plan for getting from current status (A) to TP compliant (B)
  • Agree the specific actions which the group's internal team needs to complete before the next workshop

Workshop 3: Review of proposed revised legal structure / intercompany agreements (online, 50 minutes)

  • Detailed review of revised agreements / amended agreements
  • Detailed review of a draft legal documents and actions list for implementation (including briefing notes for the directors of all supplier and recipient entities)
  • Confirmation of additional input required from other stakeholders
  • Agree the specific actions which the group's internal team needs to complete before the next workshop

Workshop 4: Pre-implementation review (online, 50 minutes)

  • Review of progress against the transition plan
  • Discussion of any issues or blockages which have arisen
  • Confirmation of the specific outstanding actions needed to complete the transition, including archiving copies of executed documents and retention of defence files
  • Consideration of the processes needed for the ongoing review and maintenance of transfer pricing agreements and related arrangements

Price: GBP 4,680 plus VAT (if applicable) (includes up to one hour’s preparation time spent by the LCN facilitator before each workshop).

A discount of 30% is available on the standard price of subscription to our toolkit of template intercompany agreements (usual price GBP 4,050 plus VAT (if applicable)), if it appears that the toolkit would be helpful to you.

Additional support is available for groups with more complex supply chain, intellectual property ownership or group structures, or those wanting more hands-on assistance for their project. For example, our Virtual Legal Director Service gives a group dedicated access to one of our senior lawyers for the equivalent of 1 day per week (or for however many hours per week or month may be appropriate).

If you think this approach may be helpful for you or any business you look after, please let me know by emailing us at info@lcnlegal.com

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Article by
Paul Sutton
LCN Legal Co-Founder

Free Guide: Effective Intercompany Agreements for TP Compliance