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  • Writer's pictureYi Lyn Tan

Navigating the Ins and Outs of Intercompany Agreements

An intercompany agreement refers to a contract between two or more entities operating within the same group of companies. Intercompany agreements may at first glance seem like an unnecessary formality, given the contracting parties’ relationship and therefore non-contentious nature of the commercial arrangements. However, intercompany agreements can serve a myriad of important functions:

What to look out for when drafting intercompany agreements

  • Consistency with TP documentation - Most multinational enterprises would already have in place transfer pricing documentation to support the pricing of the intercompany transactions, prepared by tax advisors. An intercompany agreement prepared by legal advisors should be consistent with the transfer pricing documentation. Inconsistencies and discrepancies can trigger more queries and investigations by the tax authorities during an audit.

  • Context - Utilise the recitals section to accurately reflect the background to the proposed related party transaction, and the relationship between the parties. Whilst the recitals do not set out the legal terms of a transaction, it is a useful tool to record any specific contemporaneous context to a transaction within a legal document, which will hold some weight in a future tax or regulatory audit or investigation.

  • Content - Be very clear about the subject matter of the arrangement, both in terms of the scope of service / offering as well as the agreed consideration to be paid. For example, if parties intend for an arrangement to be a limited-risk arrangement, then this should be well-identified in the agreement and all other terms of the contract should accurately and consistently reflect this intention (for e.g., terms on the allocation of risks and liabilities, and the scope of responsibilities for each party).

  • Specific regulatory requirements - Consider whether there are any specific terms that are required to be included in the intercompany agreement, depending on the nature of the intercompany transaction. Examples of these may include requirements under the BNM Outsourcing Policies, or requirements relating to compliance with the Personal Data Protection Act and related guidelines.

  • Periodic reviews and updates - Intercompany agreements should be reviewed and updated on a regular basis, to reflect the actual operational conduct of the transaction. Where required, intercompany agreements may also include clauses for periodic review and revisions of the remuneration, or for year-end adjustments.


For more information, please contact:

Tan Yi Lyn


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