If you operate within a group of companies, either international or local, certainly one of the most complex issues, both from the tax and accounting, as well as the legal side, are the relations between the members within the group.
Mutual invoicing, i.e. non-invoicing of certain services can cause numerous tax risks from:
- areas of VAT (right to deduct previous VAT, “hidden services” performed but not invoiced, shared use of space or equipment,),
- profit tax (services free of charge),
- transfer prices (intercompany prices not in line with market prices).
The policies of transfer pricing must be regulated by intercompany agreements, so tax authorities can be assured that prices in tax payer’s transactions with related parties are in accordance with ‘’arm’s length principle’’.
During its control, the Tax Administration pays significant attention to the analysis of intercompany contracts because they represent the starting point for the preparation of the Transfer Pricing Report, which can be challenged by the tax authorities in case the contracts are not adequately drafted and do not comply with the facts.
WTS team can help you to draw up all agreements with related parties in an adequate manner, taking into account all relevant legal and tax aspects in order to make business more transparent and minimize risk.
Of course, it is important to note that the clauses in the agreements should correspond to the actual state of the agreed work.