Defining IGS and CCA
To set the right footing for the discussion, let us first examine the salient features of IGS and CCA from the following aspects:
1.Commercial rationale giving rise to the different arrangements.
2.Transfer pricing methodologies commonly accepted by the authorities.
Intra-Group Services (IGS)
- Commercial arrangement: IGS refers to an arrangement between members within a group of companies where one party (service provider) provides services to another party (service recipient).
- Transfer Pricing: Cost Plus Method is vastly adopted, where the service fee is calculated on cost incurred by the service provider, with an arm’s length profit mark-up to remunerate the service provider.
- Examples: Services relating to general management, accounting and finance, human resource, technical support, procurement, marketing, distribution, R&D, information
Cost Contribution Arrangement (CCA)
- Commercial arrangement: CCA is a contractual arrangement among members within a group of companies to share common costs and risks of developing, producing or obtaining assets, services or rights.
- Transfer Pricing: Cost sharing method by allocating the total costs amongst members participating in the arrangement depending on the extent of the interests of each participant in those assets, services or rights.
- Examples: Joint research project to produce a product, joint development of intellectual property rights, cross sharing of services, etc.
