The Intercompany Recharge Agreement is essential for South African companies operating within a group structure where costs, services, or resources are shared between related entities. This document is particularly crucial in the context of South African transfer pricing regulations and tax compliance requirements. It is used when one group entity provides services, shares costs, or allocates expenses to other group entities, ensuring proper documentation of the arrangement for tax authorities and auditors. The agreement must comply with South African legislation including the Income Tax Act, Companies Act, and where applicable, exchange control regulations. It typically includes detailed methodologies for cost allocation, markup policies, and specific provisions for cross-border transactions if international entities are involved.
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1. Parties: Identification of the participating group companies, including registration details and addresses
2. Background: Context of the agreement, relationship between parties, and purpose of the recharge arrangement
3. Definitions and Interpretation: Definitions of key terms and interpretation rules for the agreement
4. Scope of Services: Description of services/costs subject to recharge between the parties
5. Calculation of Charges: Methodology for calculating recharges, including markup policies and cost allocation principles
6. Payment Terms: Timing, currency, and method of payment for recharges
7. Record Keeping and Audit Rights: Requirements for maintaining documentation and rights to audit calculations
8. Tax and VAT: Treatment of taxes, including VAT and withholding tax obligations
9. Duration and Termination: Term of agreement and circumstances for termination
10. Confidentiality: Protection of confidential information shared between parties
11. Dispute Resolution: Process for resolving disputes between parties
12. General Provisions: Standard legal provisions including governing law, amendments, and notices
1. Foreign Exchange Provisions: Required when cross-border transactions are involved, addressing exchange rate calculations and currency risk
2. Intellectual Property: Needed when services involve use or creation of intellectual property
3. Data Protection: Required when personal data is processed as part of the services
4. Service Levels: Optional section defining performance standards for services being recharged
5. Force Majeure: May be included to address circumstances preventing performance
6. Step-In Rights: Optional provisions allowing parent company to step in if subsidiary fails to perform
7. Insurance: Required when specific insurance coverage needs to be maintained for services
1. Schedule 1 - Services Description: Detailed description of services subject to recharge
2. Schedule 2 - Charge Calculation Methodology: Detailed formulas and methods for calculating charges
3. Schedule 3 - Transfer Pricing Policy: Group transfer pricing policy and compliance requirements
4. Schedule 4 - Allocated Costs: List of cost categories and allocation keys
5. Schedule 5 - Contact Details: Key contact persons and escalation matrix
6. Appendix A - Service Level Metrics: Detailed service levels and performance indicators if applicable
7. Appendix B - Required Reports: Templates and specifications for required reporting
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