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A Intercompany Agreement formalizes how related companies within the same corporate group handle their business dealings in Saudi Arabia. It spells out essential details like pricing, service terms, and profit sharing between affiliated entities, ensuring compliance with the Kingdom's transfer pricing regulations and Companies Law.

These agreements play a crucial role in Saudi corporate governance by documenting fair market transactions between sister companies, subsidiaries, and parent organizations. They help businesses meet Zakat, Tax and Customs Authority (ZATCA) requirements while protecting shareholder interests and maintaining transparent financial relationships within company groups operating in the Saudi market.

Put an Intercompany Agreement in place before starting any significant business activities between your related companies in Saudi Arabia. This is especially important when setting up shared services, transferring goods or intellectual property, or providing management support between group entities.

The timing is critical when establishing new subsidiaries, restructuring company operations, or launching joint ventures in the Kingdom. ZATCA requires documented evidence of fair market dealings between related parties, so having these agreements ready helps avoid tax complications, ensures Zakat compliance, and protects your corporate group from penalties under Saudi transfer pricing rules.

• Service Agreements: Cover ongoing support functions like IT, HR, or accounting between group companies under Saudi law
• Distribution Agreements: Manage product sales and marketing between parent companies and local subsidiaries
• Management Services Agreements: Document executive oversight and strategic support services within corporate groups
• IP Licensing Agreements: Control intellectual property rights and usage between related entities
• Cost Sharing Agreements: Structure how group companies split shared expenses and allocate costs under ZATCA guidelines

• Corporate Legal Teams: Draft and review Intercompany Agreements to ensure compliance with Saudi law and group policies
• Board Members: Approve and sign these agreements as authorized representatives of their respective companies
• Financial Controllers: Implement pricing structures and monitor financial transactions between group entities
• Tax Advisors: Ensure agreements meet ZATCA requirements and transfer pricing regulations
• Department Heads: Manage operational aspects and service delivery outlined in the agreements

• Company Details: Gather full legal names, commercial registration numbers, and addresses of all related entities
• Service Scope: Define exact services, products, or resources being exchanged between group companies
• Pricing Strategy: Document market-based pricing methodology that meets ZATCA transfer pricing requirements
• Performance Metrics: Outline service levels, delivery timeframes, and quality standards
• Approval Process: Identify authorized signatories and obtain necessary board re����ֱ��s
• Documentation: Prepare supporting evidence of fair market value and transaction records

• Party Details: Full legal names, commercial registration numbers, and authorized representatives
• Service Description: Detailed scope of services, deliverables, and performance standards
• Pricing Terms: Clear pricing methodology, payment schedules, and currency specifications
• Duration and Termination: Agreement period, renewal terms, and termination conditions
• Governing Law: Explicit reference to Saudi law and Shariah compliance
• Dispute Re����ֱ��: Saudi jurisdiction and preferred dispute re����ֱ�� method
• Confidentiality: Data protection and information sharing protocols

An Intercompany Agreement differs significantly from a Business Acquisition Agreement in several key aspects, though both are important for corporate transactions in Saudi Arabia. While Intercompany Agreements govern ongoing relationships between related entities, Business Acquisition Agreements facilitate one-time purchases of entire businesses or substantial assets.

• Relationship Duration: Intercompany Agreements establish continuous operational frameworks, while Business Acquisition Agreements typically conclude after the transfer is complete
• Pricing Structure: Intercompany Agreements require ZATCA-compliant transfer pricing, whereas Business Acquisition Agreements focus on market-based purchase valuations
• Regulatory Focus: Intercompany Agreements emphasize group compliance and tax efficiency, while Business Acquisition Agreements concentrate on ownership transfer and competition laws
• Risk Allocation: Intercompany Agreements distribute operational risks among group entities, whereas Business Acquisition Agreements address transaction-specific warranties and indemnities