Intercompany Transactions

What are intercompany transactions?

Intercompany transactions arises when the unit of a legal entity has a transaction with another unit within the same entity. Many international companies take advantage of intercompany transfer pricing and other related party transactions to influence IC-DISC, promote improved intercompany transaction taxes, and effectively enhance efficiency within the company. Intercompany transactions can be essential to maximizing the allocation of income and deductions. Here are a few examples of intercompany transactions:

  • Two departments
  • Two subsidiaries
  • Parent company and subsidiary
  • Two divisions

Intercompany transactions are broken into two basic categories: direct intercompany transactions and indirect intercompany transactions.

Direct intercompany transactions arise from intercompany transactions between different units within the same company entity and can aid in notes payable and receivable, as well as interest expense and revenues.

Indirect intercompany transactions occurs when the unit of an entity acquires the debt or assests issued to an unrelated company through another unit in the original company. This can help help several economic factors including the elimination of interest expense on retired debt, create gain or loss for early debt retirement, or remove investment in interest and bond revenue.

The importance of intercompany transactions

Intercompany transactions can help improve the flow of finances and assets greatly. Transfer pricing studies can help ensure intercompany transfer pricing falls within arms length pricing to help avoid unnecessary audits. Intercompany transactions accounting can help keep records for resolving tax disputes, especially in countries where the markets are new and there are little or no regulations governing related party transactions. Here are few areas affected by the use of intercompany transactions:

  • Loan participation
  • Sales and transfer of assets
  • Dividends
  • Insurance policies
  • Transactions with member banks and affiliates
  • Management and service fees

Proven track record

PIASCIK has been performing transfer pricing studies and providing international tax advisors for 12 years with over 70 years of combined international tax law experience. PIASCIK consultants have representation in over 49 countries with a proven track record as an industry expert in IC-DISC matters and other international tax affairs. With over 120 expatriates and foreign nationals, PIASCIK is the largest international tax practice south of DC and north of Charlotte, North Carolina. Our consultants have also proven they are recognized as industry leaders in international tax regulations, including the president of the Virginia International Business Council as a proud member. PIASCIK has also been a continuing program partner in all of Virginia's inbound and outbound international programs for the last eight years. Our highly educated professionals have even helped over 40 clients complete OVDI programs. 

Contact PIASCIK today and discover how accounting for intercompany transactions can benefit you and your company. Your initial consultation is absolutely FREE with no commitment required from you. Our world-class services are available 24 hours a day and seven days a week. We even offer flat rate fees with no hidden charges. No other international tax firm is as committed, experienced and as reliable as PIASCIK.