There are some basic principles that apply to all projects for planning, implementing and maintaining intercompany agreements for transfer pricing. We call them the Six ‘C”s. Here’s a brief run-down:
- Coverage: the aim is not necessarily to document 100% of all intercompany supplies. It is to achieve an appropriate coverage, based on a risk assessment and prioritisation. This will link into the group’s transfer pricing and BEPS compliance strategy as a whole.
- Content: the content of the intercompany agreements should reflect an appropriate level of detail – and should of course result in the agreements being capable of being legally binding (unlike many examples we have seen).
- Contemporaneous: the intercompany agreements should be put in place as contemporaneously as possible with the commencement of the supply.
- Consistent: consistency as between different intercompany agreements within a group is not an end in itself, because different supplies may merit different levels of attention. However, consistency does enable the portfolio of agreements as a whole to be managed more efficiently.
- Communication: the process leading up to execution of intercompany agreements should involve an appropriate level of communication as between parent and subsidiary boards and other stakeholders, so as to support rather than undermine corporate governance.
- Controls: documented controls, policies and procedures should be put in place for the ongoing creation, review, updating, archiving and retrieval of intercompany agreements.