In the rest of this article, the author considers four reasons why companies should consider reviewing, modifying and/or reformulating their intercompany agreements in the post-BEPS era. The reasons we are debating are not exhaustive, but they are linked by a common theme – that the form of an agreement can influence the content of this agreement – and show why inter-comcompany agreements remain important in this world of pro-substantial transfer pricing. Import existing intercompany agreements and build standard templates that can be customized for each global transaction in any jurisdiction. Avoid repeated data entry and use built-in logic to speed up the design process. There is no need to restart contracts from scratch, and the reference rules will help you correct errors. Beps focused on the rules for intangible assets. The above observations regarding the increased importance of the economic substance apply similarly. With respect to intangible assets, it should be expressly emphasized that legal ownership alone is no longer sufficient to allocate the (residual) benefits of the marketing of intangible assets to a company. Audits will need to specify which entity will assume the economic functions (risks) related to development, improvement, maintenance, protection and valuation (marketing), as well as the importance of the respective functions for intangible assets.  The corresponding classifications should be properly taken into account in both contract research agreements (strategic objectives, milestone tracking, non-results-based remuneration) and licensing agreements (right to sublicensing, specifications and participation in marketing activities, etc.). The importance of periodic review cannot be underestimated. The subject should check regularly whether the intercompany agreements are up to date and reflect the real situation.
In the absence of an intercompany agreement, the starting point of the functional analysis is the behaviour of the parties (i.e. the content itself) which may lead the tax authorities to present their own views on the functions, risks and expected results and the behaviour of the parties for the length of the arm. In addition, tax inspectors are increasingly looking for evidence that the information presented in the “Functional Analysis of Transfer Pricing Documentation” section reflects the actual behaviour of the parties. Intercompany agreements, when properly implemented, are often seen as compelling evidence of the parties` actual behaviour by tax inspectors. In most cases, the burden of proof falls on the taxpayer, so the time is spent in advance in compiling intercompany agreements, often time and effort that is well spent. It is clear that intercompany agreements remain important to tax authorities. Taxpayers are often asked to provide copies of their intercompany agreements when applying for transfer pricing, and the Australian Taxation Office (ATO) even requires Australian taxpayers to enter into intercompany agreements with the filing of the Australian Local Act. In some legal systems, year-end adjustments are only permitted if they are made on the basis of a legally binding intercompany agreement in force at the beginning of each year.
Even before the first notifications in Action 13, tax authorities are beginning to look at existing principles and request business-to-business audit agreements. I spoke with Mike Manuel, Director of Transfer at Texas Instruments (TI), about his past experience and the IT process for dealing with intercompany agreements. He found that TI has always been very careful to stay abreast of its intercompany agreements. In addition, the implementation of transfer pricing policies is often removed from the tax function within a company and responsibility is entrusted to operational services.