In other cases, it may not be possible to say that the agreement in question was already in force, but it may nevertheless be desirable to achieve a “retroactive” effect. In this situation, it may be possible to conclude an agreement now with a historic “effective date”. For example, a group may move from a merchandise sales model (in which local subsidiaries own or acquire the right to market the products in question and sell them to customers who bear a commercial risk) to an agency model (in which local subsidiaries only act as initiation agents and do not take any credit or other commercial risks when selling the products). The seller/client may agree with the local distributors to process the agreements as they have existed since the end of the previous year. This could mean the conclusion of agency contracts, which are dated when they are actually signed. Agreements could, inter alia, provide for a distribution of revenue and risk by reference to the historical date of entry into force, adjusting payments accordingly. This type of agreement would not bind third parties, but it can be effective from an accounting and tax point of view, depending on the time elapsed since the historical expiry date. These agreements are designed to be valid in countries around the world. They contain all the essential elements of the validity of the treaty. There are not a number of requirements applicable to all transfer pricing agreements in all legal systems.
Even the OECD does not provide specific guidance on what information should be included in transfer pricing agreements. That makes sense. Their guidelines are aimed at countries around the world that have different legal systems and policy areas. Since companies do not benefit from internal transactions, it becomes necessary for companies to define and document internal transactions that could take place. The purpose of an intercompensation agreement is to document transactions between departments or subsidiaries of a company so that the parent company or entity can make decisions based on the financial results obtained. It also contributes to compliance with laws and regulations, such as Section 482 of the IRS and OECD-BEPS Tax Code, as well as the allocation of risks and liabilities. There are different types of intercompany agreements, such as: where different legal persons are under common control, it is not necessary for the legal agreements between them to apply the same degree of detail as is usually used for unrelated third parties. The aim should be to document key concepts in the simplest possible way in order to provide appropriate registration, both for corporate governance and tax purposes. In general, therefore, it is not useful to use the content of commercially negotiated agreements in an internal group context. Nevertheless, many groups do not have a consistent approach to establishing and maintaining intercompany agreements.
In some cases, no intercompany agreement is concluded. In other cases, agreements are strongly influenced by trade agreements with unrelated third parties, resulting in them being too long, difficult to verify quickly and containing contractual procedures that are at best unused and, in the worst case, in direct contradiction to the way agreements are managed in practice. In addition, there is enormous freedom for individuals to enter into agreements (freedom of contract). Our agreements contain all essential aspects such as the parties, the scope, the controlled transaction and the remuneration of the transaction. In addition, clear design notes are included. Otherwise, the agreements can be tailored to your needs. The terms of intercompany agreements must be consistent with the legal and economic ownership of all relevant assets.