The Intercompany Cost Plus Agreement is essential for multinational companies operating in Hong Kong that provide services between related entities within their corporate group. This document is particularly relevant when one entity provides administrative, technical, management, or other services to another group entity, with compensation structured on a cost-plus basis. The agreement must comply with Hong Kong's transfer pricing regulations, particularly the Inland Revenue Ordinance and DIPN 59, which require transactions between associated enterprises to be conducted at arm's length. The document typically includes detailed provisions for cost calculation methodologies, markup determination, service level requirements, and documentation obligations that satisfy Hong Kong tax authority requirements. It is commonly used in shared service arrangements, regional headquarters structures, and other intercompany service relationships where transparent and compliant pricing mechanisms are needed.
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1. Parties: Identification of the service provider and service recipient entities
2. Background: Context of the agreement, relationship between parties, and purpose of the arrangement
3. Definitions: Key terms used throughout the agreement, including 'Cost Base', 'Mark-up', 'Services', etc.
4. Scope of Services: Detailed description of services to be provided under the agreement
5. Cost Calculation and Mark-up: Methodology for calculating the cost base and agreed mark-up percentage
6. Payment Terms: Billing frequency, payment timeline, currency, and payment methods
7. Documentation Requirements: Record-keeping obligations for transfer pricing compliance
8. Performance Standards: Quality standards and performance metrics for service delivery
9. Term and Termination: Duration of agreement and termination provisions
10. Representations and Warranties: Standard warranties regarding capacity and authority to enter agreement
11. Confidentiality: Protection of confidential information exchanged under the agreement
12. Governing Law and Jurisdiction: Specification of Hong Kong law and jurisdiction
13. General Provisions: Standard boilerplate clauses including amendments, notices, and entire agreement
1. Intellectual Property Rights: Include when services involve creation or use of intellectual property
2. Data Protection: Include when personal data processing is involved in service delivery
3. Staff and Secondment: Include when staff are seconded or dedicated to providing the services
4. Insurance: Include when specific insurance coverage is required for service delivery
5. Regulatory Compliance: Include when services are subject to specific regulatory requirements
6. Force Majeure: Include when specific force majeure provisions are needed beyond standard provisions
7. Anti-Corruption: Include when required by group policy or regulatory requirements
1. Schedule 1 - Services Description: Detailed breakdown of services to be provided
2. Schedule 2 - Cost Components: Detailed list of costs included in the cost base calculation
3. Schedule 3 - Mark-up Calculation: Methodology and examples of mark-up calculation
4. Schedule 4 - Service Levels: Specific performance metrics and service level requirements
5. Schedule 5 - Key Personnel: List of key personnel involved in service delivery
6. Schedule 6 - Transfer Pricing Documentation: Required documentation for transfer pricing compliance
7. Schedule 7 - Billing and Invoice Requirements: Specific requirements for invoicing and supporting documentation
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