Effective Intercompany Agreement for Transfer Pricing
Many organizations in Malaysia spend a considerable amount of time and money on preparing an efficient and reliable transfer pricing document.
Overall, the process of transfer pricing in Malaysia can be quite challenging for companies that do not have access to professional guidance.
We hope this article can help companies realize the significance of intercompany agreements and implement the best practices in transfer pricing documentation.
Importance of Intercompany Agreements
The importance of the intercompany agreements should not be taken lightly. Some companies make the common mistake of not paying full attention to preparing effective intercompany agreements.
The poor quality of such agreements can result in some serious issues for the companies.
The following are the three most important reasons why effective intercompany agreements are necessary for transfer pricing in Malaysia:
As a result, intercompany agreements are essential to fully formalize and implement the transfer pricing arrangements.
Moreover, the intercompany agreements serve as official and legal evidence for both internal and external stakeholders.
More and more countries are now demanding taxpayers to prepare proper documents.
If the companies are not able to provide satisfactory documents, then it can become a legal issue for the company.
Therefore, it is important to have a thorough and up-to-date intercompany agreement to facilitate the entire process of transfer pricing.
Important Components of an Intercompany Agreement
The best way to do it is by approaching the agreement from different angles.
Whenever your company is in the process of preparing a transfer pricing document, you will need help from both tax and finance experts and professional legal writers. The following are some of the most important parts of an intercompany agreement:
It is important to point it out because such errors are quite common in large companies.
The conclusions made in the transfer pricing documentation should be the same in the intercompany agreement.
The associated organizations should make sure that the expected terms and conditions are fully followed in the agreement.
Factors affecting the controlled transactions like licensing, legal contracts, and others can also impact the entire process.
Generally, the basic requirements of an intercompany agreement are:
- Name of the involved parties
- Nature of the controlled transactions
- Legal terms and conditions
- Details about taxes
- Information about the governing laws
In a Nutshell
Ultimately, the goal of having an effective intercompany agreement is to facilitate the process of transfer pricing in Malaysia.
It does not only help you in preparing a thorough transfer pricing document but also allow you to avoid any legal issues associated with these contracts.
Furthermore, such agreements ensure a smooth and healthy partnership between two or more companies, so you should use the best practices available to prepare an effective and reliable intercompany agreement.
For more information, feel free to get in touch with us.
