IntercompanyAgreements

Intercompany agreements are contracts between entities within the same corporate group that govern cross-border or domestic transactions. They formalize the terms under which services are provided, goods are transferred, IP is licensed, financing is extended, or cost sharing occurs. The primary purpose is to allocate rights and obligations clearly, establish pricing methodology consistent with the arm's length principle, and support accurate financial reporting and tax compliance. ICAs reduce disputes by documenting expectations for performance, allocation of costs, and responsibility for taxes, regulatory compliance, and data security.

Common forms include master service agreements (MSAs) with service level attachments, intercompany licensing agreements, cost-sharing or cost allocation agreements, and intercompany loan agreements. Core terms cover scope of activities, pricing rules and invoicing, payment terms, and duration; governance, change control, and termination; confidentiality and data protection; IP ownership and licenses; and audit rights. Many ICAs also specify tax treatment, compliance with withholding taxes, VAT/GST considerations, and dispute resolution mechanisms.

Governance and regulatory context emphasize documentation and transparency. In many jurisdictions, ICAs feed into transfer pricing documentation requirements such as master files and local files, and contribute to country-by-country reporting. Best practices include centralized contract management, a catalog of intercompany arrangements, alignment with ERP data, periodic reviews, and clear ownership of policy and pricing approaches. Well-maintained ICAs help multinational groups manage tax risk, ensure consistent operations, and support audit readiness.