Intercompany Agreement Design
The first document an Indian transfer pricing officer requests is the intercompany agreement; the first test is whether reality matches it. Groups routinely fail this test not through bad pricing but through bad paper: agreements that describe services nobody performs, risk allocations that contradict how decisions are actually made, contracts signed years after the flows they govern began, and terms copied from templates that fit a different operating model entirely. Each mismatch is a thread for the auditor to pull.
We draft intercompany agreements as operating documents rather than legal ornaments. Services agreements describe what is actually delivered and how it is evidenced; distribution arrangements allocate risk where substance sits; royalty licences define the property and the benefit with enough precision to defend the rate; and financing terms reflect arm's-length behaviour, not treasury convenience. Agreements are maintained as the business changes — because a contract that fossilised in 2020 indicts every year after it.
What this covers
- Full intercompany contract suites: services, distribution, manufacturing, royalties, cost sharing, and financing.
- Substance alignment review: whether conduct, decision-making, and documentation match the contractual risk allocation.
- Benefit-evidence frameworks for service charges — the documentation Indian auditors demand before allowing deductions.
- Pricing clauses that implement your TP policy mechanically, leaving no gap between policy and invoice.
- Periodic refresh cycles tied to business changes, restructurings, and policy updates.
Who needs this
Multinational groups whose Indian intercompany flows have outgrown their paper; tax teams preparing for audit; and companies implementing new TP policies that existing contracts contradict.
How we deliver
- Flow-by-flow review of existing agreements against actual conduct and current TP policy.
- Redrafting prioritised by audit exposure: the largest flows and weakest paper first.
- Annual maintenance cycle keeping contracts aligned as the business and policy evolve.
Why A2 Consultants
We draft these agreements with the audit in mind because we defend them in audits — the clauses we insist on are the ones we have watched decide real proceedings before Indian tax authorities.
Engagement & what to expect
Engagements typically open with a contract-to-conduct audit: every intercompany flow mapped against its paper, gaps ranked by audit exposure. Redrafting follows in priority order — largest flows and weakest agreements first — with each contract implementing your TP policy mechanically enough that invoicing and documentation flow from it without interpretation. Legal execution across group entities is coordinated with your counsel. Most clients then move to an annual maintenance cycle, where business changes are captured in contract updates before year-end, keeping paper and conduct permanently aligned.
In audit, the agreement is either your first exhibit or the department's — draft accordingly.