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How to scope the Intercompany Agreements you need for Transfer Pricing Compliance

Operational TP in the Pharma Sector: Automating Cost Allocation and P&L Segmentation, and streamlining ICAs for TP Compliance

What people say about us

Transfer Pricing in the Middle East (Part 4)

Transfer Pricing in the Middle East (Part 3)

Transfer Pricing in the Middle East (Part 2)

Transfer Pricing in the Middle East (Part 1)

Central Support Services: Intercompany Agreements for Transfer Pricing Compliance

How to scope the Intercompany Agreements you need for Transfer Pricing Compliance

Limited Risk Distributors – Legal Implementation of TP Compliance

Arendt-LCN Legal Webinar on Transfer Pricing – Managing the New Tax Risks for Private Equity Businesses

ICAs for Transfer Pricing Compliance: Intangibles and Intellectual Property

LCN Legal – Shanghai Kingfaith Webinar: Managing customs and trade compliance, TP compliance and intercompany agreements

Transfer Pricing Audits in India

LCN Legal – Adjoint Webinar: How Distributed Ledger Technology will Change The Way We Document Intercompany Transactions

How to Survive a Transfer Pricing Audit in Australia, With Zara Richie, BDO Head of Global Transfer Pricing Services

Up to speed

Taking the lead

All the right moves

Step by step

How to scope the Intercompany Agreements you need for Transfer Pricing Compliance

Accurately scoping out intercompany transactions is the essential first step in creating, reviewing or updating intercompany agreements for TP compliance. Unless this is done correctly, the resulting agreements are likely to be gibberish, and your TP objectives may fail for lack of legal implementation.

The need for alignment between intercompany agreements and TP analysis of risk has been reiterated by recent IRS guidance addressing perceived defects in transfer pricing documentation (See the answer to Q4 of the FAQs, “Risk analysis should be consistent with intercompany agreements”).

Sometimes it’s obvious what the legal nature of the transaction should be, and who the parties are. For example, central support services provided by a parent to its operating subsidiaries.

Sometimes it’s not so obvious. For example, profit split arrangements or procurement hubs.

We’ve created a new 15-minute video to help you cover the basics of scoping.

Operational TP in the Pharma Sector: Automating Cost Allocation and P&L Segmentation, and streamlining ICAs for TP Compliance

Operational TP is hard in any sector. But in Pharma there are particular challenges – including the complexity of R&D cost models, Management Fees and Overheads, and the critical role of intangible assets. In addition, multiple business acquisitions can lead to complex and rapidly changing group structures with multiple entrepreneurs in each region or country.

Given these factors, you might think that the potential benefits of technology solutions in operational TP are greater. But what can tax and TP functions expect from automation?

This private interactive workshop is specifically for in-house tax and TP professionals in the Pharmaceutical sector.

Philippe Paumier, the former Global Head of Transfer Pricing of Sanofi, will share an in-house view of the challenges involved and will air some of the questions which heads of tax and TP need to ask when considering automation.

Michael Stanhope, Practice Director from Praesto Consulting will demonstrate the capabilities that Transfer Pricing Automation solution can provide to reduce Price Setting and Adjustment cycles within the Pharma industry

Paul Sutton, co-founder of LCN Legal, will introduce the discussion, and will explain how to reduce the burden of maintaining effective intercompany agreements – which are the starting point for operational TP.

What people say about us


Leiza has been my ‘go-to’ commercial legal advisor for many years. Along with her team at LCN, Leiza has dealt with a variety of commercial matters for me, both as an in-house colleague and as external counsel, and on every occasion demonstrates inimitable professionalism and efficiency. Her legal expertise is always delivered with commercial logic: it is this which really sets her apart from the competition and which ensures ongoing loyalty.

Sharma (FRAeS), Aircraft Finance Lease

 


It is a pleasure to work with Leiza, who is very knowledgeable, pragmatic and responsive

Michiel Verveld, Chief Legal Officer, Polaroid

 


We have worked with LCN Legal over a couple of years with a focus on a material corporate reorganisation project, resultant transactions and the setup of new intercompany arrangements. We have found LCN to be able to assist across wide ranging issues apart from the core reorganisation work for which they have been excellent. Not only has their implementation work been professional with fast turnaround times, we have been particularly impressed with their understanding of the business, their advice, design work and guidance throughout. Above this, they are a pleasure to deal with, a valued partner and we would strongly recommend their services.

Group Managing Director and CFO of a multinational FinTech business

 


I worked with Paul Sutton for many years whilst he was at McGrigors / Pinsent Masons, in my role as Group Tax Manager of Sumitomo Electric Wiring Systems (Europe) Ltd (SEWS-E Ltd), and also for a period as SEWS-E Ltd Company Secretary. In this time I had extremely valuable assistance and advice from Paul, not only as regards general corporate law matters, but also particularly across a wide spectrum of legal aspects of SEWS-E Ltd group transfer pricing policies, implementation, inter-group agreements and legal compliance.

Martin L Kinsey, Group Tax Manager
Sumitomo Electric Wiring Systems (Europe) Limited

 


I have worked with Paul and his team in structuring significant Corporate Debt and have found his approach to be commercial, pragmatic and measured. I would have no hesitation working with Paul again, as we value his commercial and responsive approach.

Joanne Luce, Director
Acqua Trust Company Limited, Jersey

 


All-Fill Inc, a US based manufacturer of packaging machinery, has had the distinct pleasure of working with Ivan Hanna and the LCN Legal team in relation to our overseas acquisition projects. Ivan has displayed patience and intricate knowledge of English law as it applies to us as a foreign company. Ivan’s counsel has been calculated and sound, together we tailored an approach that is telling of our company’s aggressive nature. I was most impressed at Ivan’s willingness to dig deep into the details and investigate any way to give our side a competitive advantage while negotiating. Ivan has been our guiding light since our initial engagement.

Ryan Edginton, President & CEO
All-Fill Inc.

 


I have been working with Ivan Hanna over the past year on various corporate matters including a group share restructuring project and intercompany agreements for our transfer pricing compliance. Compared to other corporate law firms I have worked with, Ivan took the time to understand our business, our stakeholders and my needs. He was incredibly responsive and went above and beyond to manage our various stakeholders and turn around a big piece of work in a short amount of time. I have no hesitation in recommending Ivan or LCN Legal – they are what all solicitors should be!

Becky Karver, CFO
Deallus Consulting

 


It is my privilege to recommend Ivan. He is able to process requirements quickly and formulate an effective strategy that protects one’s commercial interests. He is very personable and exceeds expectations. A great lawyer!

Roop Singh Sood, Executive Producer
AKA Filmworks

 


At Caisson Investment Management, we have worked with Leiza across a number of areas including corporate restructuring and commercial agreements and we have always received a dedicated service that is second to none.  Having legal agreements that are easily understood and effectively reflect the commercial terms is of great importance and Leiza delivers both effortlessly.  It is an absolute pleasure working with Leiza as she guides you through the whole process with ease and professionalism.

Michael Newman, Finance Partner
Caisson Investment Management

 


You are by far and away the most pro-active people I have ever worked with. I normally have to chase.

Head of Group Finance
Well-known luxury hotels group

Transfer Pricing in the Middle East (Part 4)

In this final webinar in the series on “Transfer Pricing in the Middle East” hosted by Leiza Bladd-Symms (a director at LCN Legal), Rubeena Dina and Anand Vemuganti of Global Tax Services consider key issues around the impact of COVID 19 on transfer pricing matters in the Middle East, offering practical guidance on how best to navigate the same.

Transfer Pricing in the Middle East (Part 3)

In this third webinar in the series on “Transfer Pricing in the Middle East” hosted by Leiza Bladd-Symms (a director at LCN Legal), Rubeena Dina and Anand Vemuganti of Global Tax Services focus on the evolution of transfer pricing in Saudi Arabia, Qatar and the UAE, discussing the current picture in each jurisdiction and practical issues surrounding a TP Audit.

Transfer Pricing in the Middle East (Part 2)

In this second webinar in the series on “Transfer Pricing in the Middle East” hosted by Leiza Bladd-Symms (a director at LCN Legal), Rubeena Dina and Anand Vemuganti of Global Tax Services consider matters relating to transfer pricing in Egypt, including an examination of the current regulatory status, reporting requirements and the consequences of non-compliance

Transfer Pricing in the Middle East (Part 1)

In this first webinar in the series “Transfer Pricing in the Middle East” hosted by Leiza Bladd-Symms (a director at LCN Legal) Rubeena Dina and Anand Vemuganti of Global Tax Services examine global trends in transfer pricing and the ways in which these are reflected in the Middle East, focussing upon particular areas of risk for multinationals.

Central Support Services: Intercompany Agreements for Transfer Pricing Compliance

This webinar is for finance, tax, transfer pricing, legal and compliance professionals, and gives practical guidance on how to create effective intercompany agreements for Transfer Pricing compliance in relation to Central Support Services (including head office / back office services)

How to scope the Intercompany Agreements you need for Transfer Pricing Compliance

Accurately scoping out intercompany transactions is the essential first step in creating, reviewing or updating intercompany agreements for TP compliance. Unless this is done correctly, the resulting agreements are likely to be gibberish, and your TP objectives may fail for lack of legal implementation.

The need for alignment between intercompany agreements and TP analysis of risk has been reiterated by recent IRS guidance addressing perceived defects in transfer pricing documentation. Sometimes it’s obvious what the legal nature of the transaction should be, and who the parties are. For example, central support services provided by a parent to its operating subsidiaries. Sometimes it’s not so obvious. For example, profit split arrangements or procurement hubs.

We’ve created a new 15-minute video to help you cover the basics of scoping.

Limited Risk Distributors – Legal Implementation of TP Compliance

Let Paul Sutton, our co-founder, guide you through the essentials for ensuring legal substance in your transfer pricing compliance in a highly practical 30 minute webinar. Register now and watch on-demand.

Arendt-LCN Legal Webinar on Transfer Pricing – Managing the New Tax Risks for Private Equity Businesses

We are delighted to have hosted a webinar with guest speaker Danny Beeton, of Arendt on the subject of transfer pricing in the context of private equity businesses. The webinar considers:

– The risks faced by private equity businesses in a developing transfer pricing landscape
– The benefits of effective transfer pricing planning for private equity businesses, including the avoidance of disputes and penalties
– How to implement effective transfer pricing planning

ICAs for Transfer Pricing Compliance: Intangibles and Intellectual Property

This webinar is for finance, tax, transfer pricing, legal and compliance professionals, and focusses on the treatment of intangible assets and intellectual property in the context of intercompany agreements for Transfer Pricing compliance.

LCN Legal – Shanghai Kingfaith Webinar: Managing customs and trade compliance, TP compliance and intercompany agreements

This China-focussed webinar is for CFOs and Heads of Tax of Multinational Groups with significant operations in China. It will use two case studies to give attendees an introduction to:

• Customs & Trade compliance
• Transfer Pricing compliance
• Managing intercompany agreements
• Penalties and risk issues
• Practical action points

Transfer Pricing Audits in India

This webinar provides practical insights on handling Transfer Pricing audits in India and features Munjal Almoula, Transfer Pricing Partner at Grant Thornton in India as the guest speaker. Webinar attendees will gain an understanding of:

– The audit process in India, including audit triggers and procedural matters which are specific to India
– Typical issues for multinational groups, such as aggregation of transactions, manufacturing and distribution arrangements, royalties, management fees, marketing intangibles and R&D considerations
– Practical approaches for managing Transfer Pricing risks, including the success of APAs in India.

LCN Legal – Adjoint Webinar: How Distributed Ledger Technology will Change The Way We Document Intercompany Transactions

Guest speaker discussion considering the ways in which distributed ledger technology will change the way group companies share data and document intercompany transactions.

How to Survive a Transfer Pricing Audit in Australia, With Zara Richie, BDO Head of Global Transfer Pricing Services

This webinar gives practical guidance for multinational groups on handling transfer pricing audits conducted by the Australian Tax Office (ATO), a tax administration known for its direct approach.

Areas covered include:

Up to speed

Our client for this ICA project was a multinational group in the consumer products sector. Although the business was relatively young, it was already highly successful and had expanded rapidly with a presence in many countries across Australasia, Europe and the US.

As often happens with fast-growing companies, the group’s focus had been on managing that growth and keeping up with demand from customers and investors. This had taken attention away from equally important but less high-profile issues like developing internal processes. The business leaders realised that although this was not yet causing an immediate problem, there were several matters that need to be addressed including the adoption of a group transfer pricing policy and the legal implementation of the same.

We began by instigating a detailed review of the business, holding  discussions with key stakeholders and reviewing documentation and process, until we had an in depth understanding of the group’s history and objectives, its intra-group transactions  and how all this neede to be reflected in its intercompany agreements.  An important  part of managing this process and extracting the necessary information was to guide the client ensuring we asked the  right questions in order to uncover issues  that perhaps the client wasn’t aware of or did not determine as relevant.

As expected, we found a range of things that needed to be addressed, mostly stemming from the legacy of the group’s rapid expansion, such as inaccurate historic intercompany agreements that did not reflect the reality of the intra-group arrangements.

Once everything had been finessed and a bespoke and substantively accurate suite of documents provided to ensure the transfer pricing policy of the group was legally implemented, the main process was complete. The group’s directors could now focus on growth and their strategic goals, safe in the knowledge that their transfer pricing policies had genuine legal substance and would withstand scrutiny in a tax audit. As always, it’s important to continue to monitor the ICAs at regular intervals – particularly with a group that is growing as fast as this one.

There are other long-term benefits of carrying out the process too. We can share our understanding of the business: the provision of a  clear legal picture is very useful to an expanding and acquisitive group . Having a fully functional suite of intercompany agreements also simplifies the ongoing process of maintaining compliant documentation within developing group of companies.

Taking the lead

We were instructed on this ICA project by a company that provides services in the fitness sector. It has a broad, global consumer base and is part of a large multinational group with a complicated corporate structure. As is very often the case, we were recommended to the client by their US tax advisers.

As always, the first task in this matter was to scope out the intra-group supply flows, so as to fully understand the value chain analysis and the way in which the group companies interacted with each other.  Due to the particular complexities of this organisation, in terms of service supplies, intercompany loan arrangements and intellectual property ownership, this process was both fascinating and challenging.

In particular, it was necessary to reconcile the differences between the transfer pricing analysis of related party transactions, and the legal relationships involved. For example, the economic view of intellectual  property ownership is not always the same when considered from a legal perspective, but a clear understanding of how the title to intellectual property is held within a group is pivotal to correct legal implementation of the group transfer pricing policy.

Our review resulted in the identification of eleven key transactions types. The next step was to draft bespoke intercompany agreements to document these supplies and to create a suite of standardised templates for future use.

From the client’s perspective, our value add comes from our ability to bring clarity to the complex issues involved and to take a collaborative, common sense approach. Our now deep understanding of the group has already led to us being asked to advise on several other sizeable projects.

All the right moves

The client here is a technology-enabled business that supports multinational groups around the world. It’s a very strong business that is highly profitable and growing fast.

The client’s corporate structure wasn’t working well for them, for several reasons. A key problem was that from a governance point of view, the group was finding it difficult to recruit senior managers to the jurisdiction of its parent company. This meant that it was becoming increasingly difficult to maintain substance there for transfer pricing purposes.

The group therefore decided to restructure its entire operation, from governance functions and holding structure, to supply chains and ownership and control of intangible assets. This involved moving assets, functions and strategic decision-makers to new locations. One of many benefits was that the new structure would allow the group to adopt a new transfer pricing model with greater substance in all respects.

As with any restructuring project, the basic process is to (A) understand how things are working at the moment; (B) design a new structure that will achieve all the required objectives; and work out how to get from A to B. The first part of that was particularly difficult in this case, as the group was changing and growing so quickly that we were trying to hit a moving target. With that initial restructuring work completed, we created a completely new holding and finance structure for the group, and consolidated all of the group’s debt, thereby removing unnecessary foreign exchange risk.

As always, we managed the process, shepherding the project through its many stages, and keeping the client exactly as informed as they wanted and needed to be. In every project, the person who is our main key contact in the client’s organisation inevitably has to report to other senior people, so it’s essential to keep them regularly updated with all the key information about costs, progress against milestones, and so on.

At the time of writing, the initial restructuring is complete, and we have now moved onto the final phase of the initial project: re-writing all of the group’s global intercompany agreements in order to implement its new transfer pricing model. As the group is innovative and acquisitive, its structure and business divisions change rapidly, so it will be vital to regularly monitor the group’s operations, TP model and its intercompany agreements to maintain compliance over time.

Throughout the whole process, the ‘heartbeat’ of communications has been weekly project update calls, which have been held between the client’s CFO, LCN Legal and the client’s strategic tax adviser. This has enabled the core team to escalate issues, resolve blockages and adapt to the changing requirements of the group.

Step by step

Our client for this project was a publically listed multinational group in the software sector. The group has a decentralized management team (in APAC, Middle East and Europe).

Our first introduction to the group came about because, working with their transfer pricing advisers, they had commissioned a large and well-known law firm to write some intercompany agreements. The transfer pricing advisers felt, however, that the results were not up to scratch, and so they recommended us to the client instead. Our fixed-fee proposal was approved, and we have been working with them ever since.

After we had completed the initial ICA project successfully, the client asked us to work with their tax team on a reorganisation project. The group is quite acquisitive, so it had to integrate the various different businesses it had recently brought in, and align them with its own structure.

The project was a debt and legal entity rationalisation, encompassing the UK, Europe and Asia Pacific. The two main goals were to rationalise the group’s intercompany debt and arrange for it to be capitalised or settled; and to simplify the European group structure, which involved reducing the number of legal entities by about half.

There were several reasons to undertake the project. Having many entities adds cost, and significant compliance work is involved in maintaining them. Reducing the intercompany debt would also lower the group’s exposure to foreign exchange risk. And a simpler structure is much easier to manage from an operational perspective.

Our expertise in the legal implementation of transfer pricing gave us extra insight into the groups’ structures and operations, which was very valuable in our work in the reorganisation. And our ability to work seamlessly and communicate effectively with the group’s tax advisers was also key. (Failure to do this can cause real problems in reorganisation projects, because issues can ‘fall between the gaps’.)

As always, there were various technical legal questions that needed to be resolved, and the legal side of things was further complicated by the fact that the project covered many jurisdictions, some of which (such as China) required different formalities to be complied with. But the really critical aspects of any group reorganisation project are managing the process and the communication.

We were able to do just that, ensuring that all the key stakeholders within the group were fully involved, and were consulted whenever necessary. The tax team set out a top-level plan that set out the key steps. We then fleshed that out into a detailed process, with a comprehensive list of legal documents and actions required.

At the time of writing, the initial reorganisation project is all but completed, and the group has already asked us to help them with the updating and extension of intercompany agreements following a further substantial acquisition in Asia.

This ongoing role is in line with our ICA maintenance service for them. At regular intervals we review our client’s group structure and intercompany transactions, identify any gaps in the coverage of intercompany agreements, and ensure that they remain aligned with the group’s transfer pricing policies as they evolve. This is particularly important for groups such as this one which are acquisitive, or which operate in a fast-moving sector, as these things mean that the group itself changes rapidly.

 

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