Cost-sharing agreements are different from service agreements, the former having as their objective the reimbursement between undertakings resulting from the allocation of costs, while the latter are characterised by the provision of services, which means that their ultimate objective is to make a profit. Roman There is no legal provision or directive dealing with the local or cross-border tax consequences of cost-sharing agreements. Private decisions are binding only on the taxable person who requested the decision, but may set a precedent for other taxable persons in similar situations. On 31 January 2020, Judgment No. 1401-004.049 became the 1st Division of the Judgment of the 4th Chamber and the 1st Publication of the Ordinary Body of the Tax Claims Administration Board (CARF), which determines the impact of withholding tax (IRRF) for payments made to legal persons residing abroad on the basis of cost-sharing agreements, also known as cost-sharing agreements. If one of the parties wishes to amend the agreement in the future, both parties should give their consent, and the initial agreement and amendments should be recorded in writing and signed by both parties. However, many managers may be less familiar with how they can sometimes reduce their tax bill by implementing a “cost-sharing agreement” between departments that deal with the internal transfer of intangible products or services. As the name suggests, a cost-sharing agreement between, for example, a U.S.-based parent division and a foreign-based subsidiary defines the apportionment between them of the costs of intangible assets developed by the parent company and the sub-company. Typical examples of these intangible assets are a company`s specialized production methods, license fees for the manufacture of products and marketing techniques. That is why I understand that the applicant rightly claims that the transfers it makes to companies in its economic group abroad as relief from charges do not correspond to services. These are securities that can be described as reimbursement of expenses for which there is no margin, remuneration, income, profit, commission, increase in equity or other supplements that may constitute income. It can be concluded that federal revenues do not have a clear directive against the non-taxation of transfers abroad when it comes to a cost-sharing agreement.
In this context, it is worthwhile, for example, to respond to the request for tax ruling No. 21 – General Tax Coordination Office in Brazil (COSIT) 2015, which distinguishes between the simple refund and the actual provision of services for the purposes of the information provided in an ancillary obligation called Siscoserv: iii) ISS – given that there is no service, since there is no service, since there is no price that includes costs and value as a profit margin. (ii) amounts paid under a cost-sharing agreement are reimbursements; finally, it is possible to identify the cost contribution contract in which a group shares the costs and risks associated with the production or use of assets, services or rights. Generally speaking, the allocation of these expenses relates to research and development, with intangible rights or assets constituting the equivalent. In one of these structures, the company that centralizes such joint activities will support the other companies that will participate in the allocation of associated costs and expenses. A cost contribution agreement (CSA) is a framework agreed between economic enterprises to share the costs and risks associated with the development, production or acquisition of assets, services or rights and to determine the nature and extent of the interests of each participant in those assets, services or rights. The growth of economic groups has led to a general increase in cooperation agreements. According to their modern definition, economic groups often operate through a number of companies in different sectors, both in the domestic market and in the international market….