Document background
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.
