Do we need written agreements between companies in our own group?
Companies in one group trade with each other on terms nobody negotiated, and unless those terms are written down there is nothing to test them against. An agreement records the services or property supplied, the pricing mechanism, who carries which risk and how long the arrangement runs. That is the document a reviewer starts from, and the document your own accounting has to agree with. It does not make a price defensible on its own, since the pricing analysis does that, but without it the analysis describes an arrangement that has no stated terms.
Can we sign an intercompany agreement now to cover last year?
Backdating is the one thing to avoid. An agreement signed after the fact records terms the parties demonstrably did not follow, which is worse than having no agreement at all: instead of an undocumented arrangement, you have a documented breach of your own terms. The better course is to paper the arrangement from today, with terms that match what the parties actually do, and to describe the earlier years separately and truthfully, covering what was supplied, how it was settled and on what basis the price was set. That record is defensible. A document with the wrong date is not.
What should an intercompany services agreement actually say?
Four things, at minimum. What is supplied, described precisely enough that someone outside the group can tell whether it happened. How the price is set, as a mechanism rather than a fixed sum, so the agreement survives a change in volume. Who bears which risk, because the risk allocation is what the pricing has to be consistent with. And the term, with how it renews or ends. Then apply the practical test: read the invoices and the ledger beside it. If the agreement says one thing and the settlement does another, the agreement is the part that gets disregarded.
Does the tax authority follow our agreement or our conduct?
The conduct. An agreement is evidence of what the parties intended, and it carries weight for as long as they behave consistently with it. Where conduct diverges, authorities look at what was actually done: who performed the work, who took the decisions, who absorbed the loss when something went wrong. A clause allocating risk to an entity with no people and no ability to control that risk does not move the risk. That is why the drafting exercise and the operational review belong together. The document has to describe the business you have, not the one that would price well.
Do intercompany agreements need to match our invoices?
They do, and a mismatch is one of the easiest things for a reviewer to find. If the agreement describes a support service charged on an allocation key while the invoice says royalty, two documents in the same file contradict each other about what was supplied. The same applies to timing, currency and the entity named as supplier. Fixing it is usually clerical rather than technical: align the invoice narration, the general ledger account and the agreement's own wording, then check a sample each year rather than at the point somebody asks.
Who should sign intercompany agreements in a family-owned group?
Someone with authority to bind each company, and not the same person on both sides where that can be avoided. Where the group is closely held and one individual controls every entity, the signature itself adds little, so the weight shifts onto whether the terms are commercially sensible and whether the parties follow them. Record the decision as well, in a directors' resolution or a minute referring to the agreement, so there is evidence the company as a legal person entered the arrangement. Then keep the executed copies somewhere the finance team can actually retrieve them.
What is FAPI, and how does it differ from GILTI?
Canada's foreign accrual property income taxes a Canadian shareholder currently on the passive income of a controlled foreign affiliate — interest, rent, royalties, certain gains — with a deduction that recognises foreign tax already paid on it. GILTI comes at the problem from the opposite side: it targets active income above a return on tangible assets. A group with both a Canadian and a US shareholder can therefore be inside both regimes on different slices of the same profit. See GILTI against FAPI.
Are foreign trusts taxable in Canada?
They can be. Canada's deemed-resident-trust rules can pull a non-resident trust into the Canadian tax system where there is a resident contributor or, in some cases, a resident beneficiary — taxing it as though it were resident here. Separate reporting applies to transfers or loans to a non-resident trust and to distributions and debts from one. The planning point is that contributing to an offshore trust from Canada rarely achieves what the brochure suggests. See non-resident trusts.
