The Importance of Intercompany Agreements

Intercompany agreements between Japanese entities and overseas group companies are frequently absent or inadequately drafted. Although not legally required by the Japanese tax law, well-constructed intercompany agreements are critical for substantiating the arm’s length nature of intercompany transactions during tax audits and for mitigating transfer pricing risks.

This article outlines the significance and effectiveness of maintaining robust intercompany agreements, highlights the essential elements that should be included, and provides practical considerations for preparing such agreements.