It is important to ensure that intercompany agreements respect reality, comply with transfer pricing documentation and comply with market standards. If you need price-compliant intercompany agreements for your controlled transactions, we have something for you… Joanna: We can`t promise it will work anyway, but that`s the idea. We say it is for physical goods, because it is not for electronic products, like software. There are specific provisions that you need for electronic products, such as the conditions for delivery, access and transfer of ownership of products that we have not addressed in this agreement. Joanna: This is an internal document to the group, because the concept of a limited risk allocation agreement is generally used only in the context of a group of companies. The specific risk allocation and transfer pricing agreements provided for by this agreement are not suitable for a distribution agreement with an unrelated third party. After the corresponding prices have been determined, it is necessary to establish business-to-business legal documents in order to follow the transfer pricing policy and method. In order to avoid future tax burdens or tax disputes with governments, companies must adapt their business model and business practices to their legal agreements and provide the documents required by the relevant tax authorities. The best way to develop an intercompany agreement is to take a multidisciplinary approach.
Tax and financial experts develop transfer pricing documentation, but may not have the expertise to establish legal documents. Similarly, lawyers are generally in the dark about transfer pricing rules. It is therefore important to ensure that the right people and skills are on board. With regard to traditional distribution agreements, the primary price mechanism refers to the price of the goods delivered and the amount of the discount offered on list prices. In addition, the distributor may be required to pay a single or annual fee for the privilege of acting as a distributor, similar to a deductible tax. A commission representative usually works as a sales agent who does not buy products on resale, but receives a commission on the sale of products to customers. The commission agent contacts clients on behalf of a manufacturing or distribution unit. A commission officer is responsible for typical business functions, such as .B.
(i) identifying potential clients; (ii) the use of active and potential clients; iii) introduction of new products; (iv) orders received from customers; (v) customer relations maintenance; and (vi) limited technical assistance. The Commission representative performs fewer operational functions than a distributor/distributor and a limited distributor and generally does not participate in strategic or marketing activities. PartnerVine: So, if it`s a standard contractual structure, do the terms vary from one agreement to another? For a DTH, the resale price method or the comparable profit method (CPM) can be used to determine the amount of payment receivable. Different algorithms can be used to determine a targeted payment return, for example. B a return on sales (ROS) or the Berry Ratio (i.e. the ratio between gross margin and operating costs). Intercompany agreements can cover different controlled transactions. Below, we give a common overview: Apple Austria transfers its shares and its customer list to Apple Germany. In practice, companies often neglect contractual obligations between companies. And even when intercompany agreements are concluded, they are often poorly drafted, obsolete and do not reflect the economic reality of controlled transactions. The lack of intercompany (quality) agreements can be a risk for many reasons.