Intra-group agreements are an essential tool for structuring economic relations between companies belonging to the same group. You need to master their legal framework and tax implications to secure your operations. These agreements govern financial flows, the provision of services and the transfer of resources within your structure. Careful drafting and pricing in line with the arm’s length principle are essential to avoid tax reassessments.

What are intra-group agreements?

Intra-group agreements refer to all contractual agreements concluded between companies belonging to the same group to formalize their commercial, financial or service relationships. In particular, these agreements govern management fees, loans and the provision of resources. Article 57 of the French General Tax Code stipulates that the prices charged must comply with the arm’s length principle, i.e. correspond to the conditions that would have been agreed between independent companies, in order to protect the French tax base against indirect profit transfers.

Typology of intra-group agreements

Service agreements

Service agreements formalize the arrangements by which a company provides administrative, accounting or management services to other group entities. Remuneration must reflect the real value of the services provided, and you must document the nature of the services, their usefulness and the pricing method. The tax authorities systematically verify the reality of the service, its actual usefulness and the normality of its remuneration. A service with no identifiable added value constitutes an abnormal act of management, and the sums paid may be subject to tax reintegration.

Treasury agreements

Cash management agreements centralize and manage the group’s financial flows. This optimizes liquidity management and reduces banking costs, thanks to a pivot company that centralizes surpluses and finances the needs of other entities. Interest rates on advances must be in line with those charged by financial institutions for comparable transactions, otherwise your company is liable for tax reassessment.

Availability agreements

These agreements concern personnel, premises, equipment or intellectual property rights. You temporarily transfer the use of a resource without transferring ownership. Invoicing must cover the costs incurred and include a reasonable margin if the service provider assumes risks or adds value. In the case of seconded personnel, you must invoice the full costs, with a margin if necessary, depending on the level of responsibility assumed. The provision of services without financial consideration constitutes an abnormal benefit.

Documentation and justification requirements

For each intra-group agreement, you need to compile robust documentation, including the signed contract, description of services, pricing method and comparables. This documentation is part of the broader framework of corporate group taxation. Article 223 quinquies B of the General Tax Code requires groups exceeding certain thresholds to produce transfer pricing documentation contemporaneously with the transactions. A posteriori justification has less probative value in the eyes of the tax authorities. Keep all evidence demonstrating the reality of the transactions.

Valuation methods for intra-group transactions

There are several methods recognized by the OECD for valuing intra-group transactions. The comparable open market price method is the benchmark when similar transactions exist between independent parties. This direct approach is particularly reliable, but requires access to comparable market data.

The transactional net margin method is frequently applied to the provision of services. You determine an appropriate net margin based on the functions performed, the assets used and the risks assumed. The choice between these methods depends on the nature of the transaction and the availability of comparable information, and must be justified in your documentation.

Tax risks and litigation

Intra-group agreements are a major issue in tax audits. The tax authorities systematically examine these transactions to detect any indirect profit transfers. As a result, you may incur substantial tax write-backs and penalties. An adjustment is made when the tax authorities demonstrate that the conditions applied deviate from those prevailing in the market. The burden of proof lies with you to establish the normal nature of your transactions. Insufficient documentation or manifestly abnormal prices make the auditor’s job easier.

Prevention remains your best strategy. You need to review your agreements regularly to ensure that they are in line with market and regulatory developments. A preventive transfer pricing audit identifies areas of risk before a tax audit and enables you to adjust your practices.

Legal and tax protection for intra-group agreements

You can secure your intra-group agreements through a number of mechanisms. The Advance Pricing Agreement (APA) enables you to negotiate the applicable valuation method with the tax authorities, and protects you against reassessments. The tax rescript procedure is an alternative way of obtaining a position from the tax authorities on a specific point. The assistance of a specialized consultant is often essential in structuring your agreements, choosing the appropriate valuation method and compiling convincing documentation, thus limiting your litigation risks.