If you operate within a corporate group, whether international or local, one of the most complex issues—tax, accounting, and legal alike—is the relationship between group members.

Intercompany invoicing, or the lack thereof for certain services, can create numerous tax risks in the areas of:

• VAT (right to deduct input VAT, “hidden services” that are performed but not invoiced, joint use of premises or equipment, etc.),

• corporate income tax (services provided free of charge),

• transfer pricing (intercompany prices not aligned with market prices).

Transfer pricing policies should be properly defined through intercompany agreements, in order to provide tax authorities with assurance that prices in the taxpayer’s related-party transactions are in line with the arm’s length principle.

During audits, tax authorities pay particular attention to the review of intercompany agreements, as they represent the starting point for preparing the transfer pricing report. This report may be challenged by the tax authorities if the agreements are not properly drafted or are inconsistent with the actual circumstances.

The WTS team can assist you in drafting all agreements with related parties in a proper manner, taking into account all relevant legal and tax aspects to ensure more transparent operations and minimize risks.

It is important to note that the clauses in the agreements should reflect the actual nature and terms of the contracted business.