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Intercompany Cost Plus Agreement for the United States

Intercompany Cost Plus Agreement Template for United States

An Intercompany Cost Plus Agreement is a legally binding contract used in the United States to govern the provision of services between related entities within the same corporate group. It establishes the methodology for calculating service costs and applying an agreed mark-up percentage, ensuring compliance with transfer pricing regulations and IRS requirements. The agreement details the service scope, cost components, mark-up calculation, payment terms, and documentation requirements.

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Intercompany Cost Plus Agreement

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What is a Intercompany Cost Plus Agreement?

Intercompany Cost Plus Agreements are essential documents for U.S. corporate groups managing internal service arrangements between related entities. These agreements are particularly crucial for compliance with IRS transfer pricing regulations and documentation requirements. The Intercompany Cost Plus Agreement establishes a clear framework for calculating service costs, applying appropriate mark-ups, and maintaining proper documentation. It helps organizations demonstrate that their intercompany transactions are conducted at arm's length, protecting against potential tax authority challenges while providing a structured approach to internal service provision and cost allocation.

What sections should be included in a Intercompany Cost Plus Agreement?

1. Parties: Identification of the service provider and service recipient entities

2. Background/Recitals: Context of the agreement and relationship between parties

3. Definitions: Key terms used throughout the agreement including cost components, services, and pricing terminology

4. Services: Detailed description of services to be provided between the parties

5. Cost Calculation: Methodology for calculating base costs and included cost components

6. Mark-up: Agreed percentage mark-up and calculation method in compliance with transfer pricing regulations

7. Payment Terms: Billing frequency, payment methods, currencies, and timelines

8. Term and Termination: Duration of the agreement and termination provisions

What sections are optional to include in a Intercompany Cost Plus Agreement?

1. Performance Standards: Service level requirements and performance metrics when specific service levels need to be maintained

2. Intellectual Property: IP rights and obligations for cases where services involve creation or use of intellectual property

3. Force Majeure: Provisions for unforeseen circumstances affecting service delivery

4. Dispute Resolution: Process for resolving disagreements including jurisdiction and governing law specifications

What schedules should be included in a Intercompany Cost Plus Agreement?

1. Schedule A - Service Description: Detailed breakdown of services to be provided

2. Schedule B - Cost Calculation Methodology: Detailed explanation of cost components and calculations including allocation methods

3. Schedule C - Transfer Pricing Documentation: Supporting documentation for pricing methodology and compliance with regulations

4. Schedule D - Service Level Requirements: Specific performance metrics and standards if applicable

5. Schedule E - Rate Card: Applicable rates for different service categories and personnel levels

Authors

Alex Denne

Head of Growth (Open Source Law) @ tiktok成人版 | 3 x UCL-Certified in Contract Law & Drafting | 4+ Years Managing 1M+ Legal Documents | Serial Founder & Legal AI Author

Jurisdiction

United States

Cost

Free to use
Clauses






























Industries

Internal Revenue Code Section 482: Primary U.S. tax regulation governing transfer pricing between related entities, ensuring transactions are conducted at arm's length

Treasury Regulations 锟斤拷1.482: Detailed implementation guidelines for transfer pricing rules, including methods for determining appropriate pricing and cost allocation

State Corporate Laws: Legal framework governing corporate entities' operations and transactions within specific states where entities are incorporated

Securities Exchange Act: Federal regulations applicable when any party to the agreement is publicly traded, including disclosure requirements

GAAP Compliance: Generally Accepted Accounting Principles that must be followed for financial reporting and cost allocation methods

FASB Guidelines: Financial Accounting Standards Board directives for accounting treatment of intercompany transactions and cost allocations

Cost Accounting Standards: Specialized accounting standards particularly relevant if government contracts are involved in the business relationship

OECD Transfer Pricing Guidelines: International standards for transfer pricing that may affect U.S. intercompany agreements with international implications

BEPS Rules: Base Erosion and Profit Shifting regulations designed to prevent tax avoidance through international transfer pricing manipulation

Foreign Tax Treaties: Bilateral agreements between the U.S. and other countries affecting taxation of intercompany transactions across borders

FCPA: Foreign Corrupt Practices Act requirements for maintaining accurate books and records in international business transactions

Uniform Commercial Code: Standardized state laws governing commercial transactions, including contract formation and enforcement

Statute of Frauds: Legal requirement that certain contracts must be in writing to be enforceable

Transfer Pricing Documentation: Required documentation to support the pricing methodology and demonstrate compliance with transfer pricing regulations

IRS Form 5471: Information return required for U.S. persons with respect to certain foreign corporations involved in intercompany transactions

Teams

Employer, Employee, Start Date, Job Title, Department, Location, Probationary Period, Notice Period, Salary, Overtime, Vacation Pay, Statutory Holidays, Benefits, Bonus, Expenses, Working Hours, Rest Breaks, 聽Leaves of Absence, Confidentiality, Intellectual Property, Non-Solicitation, Non-Competition, Code of Conduct, Termination, 聽Severance Pay, Governing Law, Entire Agreemen

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