Not a Lexis+ subscriber? Try it out for free.

Tax Law

Intercompany Agreements for U.S.-Based Multinational Enterprises

On September 16, 2014, the Organisation for Economic Co-operation and Development (OECD) released its final guidance on transfer pricing documentation and country-by-country (CbC) reporting. Developed as a replacement for the existing Chapter V (Documentation) of the Transfer Pricing Guidelines for Multinational Enterprises and Tax Administrations (OECD Guidelines) — last revised in 1995 — the new guidance prescribes specific documentation to be compiled by multinational enterprises to support their structuring and pricing of intercompany transactions. Specifically, among other things, the final guidance calls for taxpayers to include a list of "important agreements" pertaining to intangibles in the master file and copies of all "material intercompany agreements" in the local transfer pricing documentation files of their worldwide affiliates.

Globally, rules regarding intercompany agreements vary widely. Although it is a leading practice, U.S. transfer pricing rules generally do not require intercompany agreements to be in place in order for related party transactions to be respected by the Internal Revenue Service (IRS). However, other jurisdictions require agreements, particularly to support intercompany charges that result in local deductions.

In Nigeria, for example, intercompany agreements between the local company and its foreign affiliate must be in place before a tax deduction can be granted. Like certain other jurisdictions, Nigeria takes the additional step of requiring that — to have effect — certain agreements relating to technology transfers, intellectual property, and management and technical services be approved by the National Office for Technology Acquisition and Promotion (NOTAP) in advance. Failure to register with NOTAP may result in the denial of a tax deduction and a restriction placed on the remittance of fees for such transactions.

Although executed contemporaneous agreements may not be an explicit requirement in a jurisdiction, it may be potentially difficult to make an intercompany payment in their absence. Such is the case in Argentina where — even though it is not mandatory for agreements to be in place — the commercial bank involved in transferring the intercompany payment to the related entity abroad will require copies of timely executed agreements before remitting the cash. As Argentine taxpayers cannot take a deduction for intercompany services charges paid after the income tax return due date, it follows that the taxpayer must have an agreement in place. In certain instances, Argentine tax rules require that agreements — such as those for technical services — be registered with local authorities in order for the transactions to be respected.

Thus, a lack of compliance with local documentation requirements related to intercompany agreements may contribute to instances of double taxation for multinational enterprises. With countries around the world signaling adoption of the OECD's new documentation guidance, now is the time for multinational enterprises to assess the level of intercompany agreement coverage for their material transactions globally and to take action to remedy any identified gaps. Such an analysis is particularly critical for U.S.-based taxpayers who, historically, may not have prepared and executed intercompany agreements as a matter of course...


Information referenced herein is provided for educational purposes only. For legal advice applicable to the facts of your particular situation, you should obtain the services of a qualified attorney licensed to practice law in your state.

Brad Anwyll, Dale Bond, Elizabeth Sweigart, and Kathryn Mains are with PricewaterhouseCoopers LLP. Brad, a Principal, has over 30 years of experience in tax controversy and litigation matters involving federal and international issues. He can be reached at Dale, a Partner, has nearly 25 years of experience providing international tax and transfer pricing advisory services to clients in a variety of industries including oil and gas, consumer products, and high technology. He can be reached at Liz, a Director, has nearly 15 years of transfer pricing, tax controversy, and project management experience. She can be reached at Kate, an Associate, can be reached at Learn more about PwC at

LEXIS users can view the complete commentary HERE. Additional fees may apply. (Approx. 7 pages)

 RELATED LINKS: For more discussion of transfer pricing and the arm's-length standard, see:

For coverage of OECD guidelines on services, see:

Discover the features and benefits of LexisNexis® Tax Center

For quality Tax & Accounting research resources, visit the LexisNexis® Store