Effective intercompany agreements for transfer pricing

The fundamental requirement of intercompany agreements is clearly that they are consistent with the transfer pricing functional analysis. They should also differentiate the supply from other comparables and match the legal ownership of relevant assets. In addition, they should reflect arrangements which the directors of all participating entities can properly approve. Long-form contracts are rarely appropriate. Within a larger group, the most efficient approach can be to prepare short ‘contract schedules’, which are signed on a bilateral basis between each supplier and recipient, set out the key variables and refer to ‘standard terms’, which are common to all supplies of that nature made within the group.