Finally, business-to-business agreements must be legally binding, which means that the key terms of the agreement must have “legal certainty”. While the tax reasons for well-designed intercompany agreements are sufficiently convincing (hmRC has been earning well over a billion pounds in additional taxes on transfer pricing requests for many years), there are also non-tax factors. Companies that have multiple departments can benefit from business-to-business agreements because they are able to transfer goods and services to a place in the company that benefits the most without achieving negative tax outcomes. By separating goods and services that arise from other transactions through company agreements, they can help the company and its operations interpret and analyze inventory and sales information more effectively. In our course, we offer a more detailed description of these requirements. We reaffirm that the content of the Business-to-Business Agreement should be consistent with the three principles set out above. A third-party agreement, on the other hand, is the result of negotiations on the GTC by two independent companies that protect their own interests. Usually, such an agreement is carefully drafted and reviewed before being accepted by both companies. It is unlikely that either party will be able to unilaterally dictate the terms and conditions of the agreement. There are real savings through a proactive approach to beBS compliance, the group`s transfer pricing policy and related intercompany agreements. Care must be taken to ensure that business-to-business arrangements are real, comply with transfer pricing documentation and market standards. The content of intercompany agreements depends largely on the type of transaction under control and the jurisdictions in which the controlled transaction(s) take place. Complex controlled transactions, such as intellectual property licensing, require detailed contracts.
Contracts for easily controlled transactions, such as . B the provision of management services, can remain simple. The legal provisions should reflect an agreement that the directors of each participating company may duly approve as a promotion of the interests of that company. This means that some proposed agreements can be problematic – e.B. agreements in which a particular company would incur continuous losses; be exposed to liabilities or cash flow receivables that they cannot afford, or “donate” assets or assets, especially if they are a parent company. CFOs of international companies should ensure that there are legally binding intercompany agreements and that transfer pricing risks are minimised. If you don`t, the tax authorities will have access to the group`s bank accounts so they can withdraw what they deem fair. Other common mistakes include overly complicated agreements, which do not coincide with ownership and the flow of intellectual property, which do not adequately reflect group structures, which do not protect against inappropriate termination provisions, and which neglect the importance of making arrangements to share costs among several service recipients.
The following example shows what can happen without transfer pricing agreements: because they cannot make a clear statement about which intra-group deliveries are made at what price, how relevant assets are held and how risks are spread across Group companies. .
