Transfer Pricing Compliance Healthcheck for Tax, Legal, Compliance and Risk Functions of Multinational Corporates

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1 Transfer Pricing Compliance Healthcheck for Tax, Legal, Compliance and Risk Functions of Multinational Corporates Practices and Procedures for Managing Intercompany Agreements Introduction Historically, tax authorities globally have placed great importance on the existence of documentation to support a multinational group s cross-border intra-group charges for goods and services. The impact of the various BEPS ( Base Erosion and Profit Shifting ) initiatives is expected to significantly increase such importance. This preliminary healthcheck questionnaire focuses on the practices and procedures relating to the Intercompany Agreements required to support a group s transfer pricing compliance. It is intended to be thought provoking, rather than an exhaustive list. LCN Legal specialises in the legal implementation of corporate structures. This includes the drafting of intercompany agreements for transfer pricing. We work alongside tax, transfer pricing, legal, compliance and company secretarial professionals within large corporates and in private practice, and we regularly publish resources for our clients and contacts. Should you wish to discuss how we can help you in this area, please contact LCN Legal by telephone on or us at info@lcnlegal.com. Licence, terms of use and disclaimer Subject to the terms set out below, LCN Legal Limited grants users (including corporate bodies and their advisers) a worldwide, royalty-free, non-exclusive, perpetual (for the duration of the applicable copyright) licence to use and adapt this document solely for the purpose set out above. By using this document, you confirm that you have read, understood and agree to these terms and, where you are acting on behalf of a body corporate or partnership, that they agree to these terms and conditions. If you do not agree to these terms, you must stop using the document immediately. The licence and terms of use are governed by English law. In the event of any matter or dispute arising out of or in connection with the licence and terms of use, you and we shall submit to the nonexclusive jurisdiction of the English courts. This resource is provided on an as is basis. Users should take their own professional advice, and this document should not be relied upon as a substitute for such advice. No responsibility is accepted by LCN Legal Limited or any other contributors, or any of their respective directors, partners, employees, agents or representatives for any cost, loss or liability, however caused, incurred by any person by reliance on it. This document is protected by copyright and/or other applicable law. Any use or distribution of the document other than as authorised under this licence or copyright law is prohibited. Improvements welcome Resources can always be improved. Please send any comments or suggestions to LCN legal at info@lcnlegal.com. LCN Legal is the trading name for LCN Legal Limited, a limited liability company registered in England and Wales with number The practice address and registered office address is at 71 Wallace Court, 42 Tizzard Grove, London, SE3 9EP. LCN Legal Limited is authorised and regulated by the Solicitors Regulation Authority. Page 1 of 6

2 Transfer Pricing Compliance Healthcheck for Tax, Legal, Compliance and Risk Functions of Multinational Corporates Practices and Procedures for Managing Intercompany Agreements 1. General policies Do you have a written policy as regarding the preparation, signature and maintenance of intercompany agreements for transfer pricing? Yes No If yes: Who is required to sign off the policy and any changes to it? Tax Legal Finance Company secretarial Internal audit and/or Compliance HR Regulatory (if applicable) Business units (please specify) Other (please specify): When was it last updated? When is it due to be updated next? If no: What other documentation exists which relate to procedures in this area? (e.g. job descriptions, objectives and responsibilities) Page 2 of 6

3 2. Identifying relationships to document by way of intercompany agreement 2.1. What materiality threshold or other criteria are applied to decide whether a particular intercompany supply is documented by way of intercompany agreement? 2.2. What procedures exist to ensure that all appropriate intercompany supplies are documented by way of intercompany agreement (and none are omitted)? 2.3. What procedures exist to prioritise the production or updating of particular intercompany agreements over others? 3. Preparation and review of intercompany agreements 3.1. In relation to any intercompany agreements which are required to be documented: Who is responsible for the preparation of intercompany agreements? What procedures exist to ensure that the intercompany agreements in place are consistent with the following: Current business models and systems Current practice as regards accounting entries and intercompany charges Current transfer pricing policies The legal and/or beneficial and/or economic ownership of intellectual property within the group The legal and/or beneficial and/or economic ownership of goods Rights and obligations as regards third parties Regulatory approvals Insurance arrangements Page 3 of 6

4 What format or formats are used for intercompany agreements? (indicate all that apply) Bilateral agreements Multi-party agreements Template Customised Other (please specify) Who is required to approve the form and content of template intercompany agreements? Tax Legal Finance Compliance/Regulatory Business units Other (please specify) Who is required to approve the form and content of specific intercompany agreements? Tax Legal Finance Compliance/Regulatory Business units Other (please specify) What technology or approach is used for the production of individual intercompany agreements? Manual document production Automated document production Other (please specify) Page 4 of 6

5 4. Approval and signature of intercompany agreements 4.1. At the level of each participating legal entity, who is required to approve each specific intercompany agreement before it is signed on behalf of that entity? Delegated authority, e.g. by power of attorney, board delegation, etc. (describe) Approval at board meeting or other similar organ Other (please specify): 4.2. What information (if any) is provided to the proposed signatories or approvers of intercompany agreements as to considerations they should take into account? (e.g. generic briefing note, specific briefing note relating to each specific arrangement) 4.3. What technology or approach is used for the actual signature of intercompany agreements? (e.g. manual signature, circulation of PDF copies by , electronic signature (describe system / platform used)) 5. Archiving and retrieval 5.1. Is there a central or local log of intercompany agreements? If yes, describe location, format and data fields included Where are the hard copy originals of intercompany agreements kept? 5.3. How is access to those originals restricted? 5.4. How long would it take the tax function to gain access to specific documents? Page 5 of 6

6 5.5. Where are electronic copies of intercompany agreements kept? 5.6. How is access to those electronic copies restricted? 6. Lessons learned and efficiency gains 6.1. Which people and/or specific approaches have made the biggest contribution to the group s ability to manage its intercompany agreements, and why? 6.2. Which specific approaches have not worked, and why? 6.3. Which aspects of the task of creating and maintaining intercompany agreements is perceived to be the most time-consuming or inefficient? 6.4. Which approaches or tools would significantly improve the group s ability to manage its intercompany agreements more effectively in the future (or to reduce the resources required to do so)? 6.5. Will the approaches be changed or influenced by the OECD s BEPS Guidelines? If so, how? If not, why? LCN Legal - Assistance LCN Legal can help with preparing and/or reviewing intercompany agreements from a legal perspective. If you would like to discuss the services and support we can offer on a pre-agreed fixed fee basis, please call us on or us at info@lcnlegal.com. Page 6 of 6