Intra-group services and licensing support
Intra-group services and licensing support
TaxIQ Africa provides technical expertise to ensure that cross-border payments for services and Intellectual Property (IP) are arm’s length, commercially justifiable, and compliant with the substance over form requirements of African tax authorities.
- We help clients manage the tax complexities of using group-owned intangibles
- We assist in designing and defending service charge models (Management Fees, IT Support, Technical Assistance):
- For routine administrative services, TaxIQ Africa can help implement the OECD-simplified approach
- Intra-group payments are high-risk targets for WHT assessments
- Management fees and royalties are often the first items challenged during a tax audit. Our services
Intra-group services and licensing support
What to Learn More About Intra-group services and licensing support ?
Licensing & Royalty Structuring
We help clients manage the tax complexities of using group-owned intangibles:
Intellectual Property Economic Ownership Analysis
We determine who actually performs the DEMPE functions (Development, Enhancement, Maintenance, Protection, and Exploitation). This ensures that royalty payments are made to the entity that actually creates value, not just the legal owner.
Royalty Rate Benchmarking
Using specialized databases like RoyaltyStat, we identify arm’s length royalty ranges for trademarks, trade names, patents, and proprietary know-how.
Multi-Year Analysis
Valuation of Intangibles: We provide valuation services for the transfer of IP within the group, ensuring that the exit tax or purchase price complies with local and international standards.
Intra-Group Service (IGS) Frameworks
We assist in designing and defending service charge models (Management Fees, IT Support, Technical Assistance):
The Benefit Test Documentation
We help you compile the Business Case required by authorities like the URA or KRA, proving that the services were actually rendered and provided a clear economic benefit to the local subsidiary.
Shareholder Activity Reviews
We identify and exclude stewardship or shareholder costs (such as group audit or board meeting expenses) that are legally non-deductible at the subsidiary level.
Direct vs. Indirect Charge Methods
We advise on the most defensible way to charge for services whether through direct identification of costs or via an allocation key (e.g., revenue, headcount, or computer users).
Low Value-Adding Services Simplified Approach
For routine administrative services, TaxIQ Africa can help implement the OECD-simplified approach:
5% Markup Application
We identify services that qualify as low value-adding (e.g., HR, accounting, or legal support) and apply the standardized 5% markup, which reduces the compliance burden and the likelihood of audit challenges.
Cost Pool Verification
We audit the cost pools to ensure only eligible pass-through costs are included, preventing the markup of taxes or third-party reimbursements.
Withholding Tax (WHT) & Treaty Management
Intra-group payments are high-risk targets for WHT assessments
Treaty Eligibility Reviews
We verify if the recipient of the royalty or service fee qualifies as the Beneficial Owner under the relevant Double Taxation Agreement (DTA) to access reduced WHT rates.
Characterization of Payments
We advise on whether a payment should be classified as a Service Fee (often taxed at 15%) or a Royalty (which may have different treaty protections), preventing costly re-characterization by tax auditors.
Controversy & Audit Defense
Management fees and royalties are often the first items challenged during a tax audit. Our services include:
Technical Rebuttals
We draft detailed responses to tax authority queries regarding the necessity and arm's length nature of intra-group charges.
Audit Readiness Reviews
We conduct mock audits of your current intra-group agreements and invoices to identify and fix documentation gaps before the tax authority arrives.
Legal & Contractual Support
Ensuring the legal paperwork matches the tax policy
Intercompany Agreement (ICA) Drafting
We draft technical agreements that explicitly define the scope of services, the IP being licensed, and the specific payment terms required to meet EFRIS/eTIMS compliance.
Customs Valuation Alignment
For manufacturers, we ensure that royalty payments built into the price of imported raw materials or components are correctly disclosed for both Customs and Income Tax purposes.