The management services agreement is used when one party (the client) hires another party (the service provider) to provide them with professional services. Subsequently, the agreement sets out the duties of the service provider and client, terms of payment and compensation, deadlines for work to be completed.

We designed the management services agreement (cost sharing agreement)  for the purpose of sharing the group entity’s costs between the benefiting entities. Moreover, the agreement follows the transfer pricing requirements regarding intra-group services, namely, the substance of the services (exclusion of not allowed activities), allocation principles and application of the OECD recommended level of mark-up.

Services included

The management services agreement addresses the following allowable management and other services:

    • Strategic management services.  Strategic management is the process of determining the goals, objectives and priorities for an organization. It is a process that integrates all aspects of an organization’s work to achieve its objectives.
    • Daily corporate services. Corporate services are a significant part of many different companies, from large to small. They do things such as payroll and benefits, management of company property, and employee relations. The corporate services usually include:

      • human resources services
      • information technology services
      • legal  services
      • technical services
      • training
      • finance and accounting services
      • sales support services
      • other.
  • the management services agreement lists also the services which are usually not-allowed (e.g. shareholder expenses and other expenses that do not benefit the recipients)
  • suggests the appropriate cost base and the mark-up for management services
  • has “no-permanent establishment”, “no-agency” and no “personnel lease” clauses
  • recommended level of mark-ups for different types of the managements services, e.g. low value added services
  • invoicing and transfer pricing adjustment technique.


The content of the agreement is as follows:

  • Contracting parties
  • Preamble
  • Services (Subject of the Agreement)
  • Service Fees
  • Payment of service fees
  • Record keeping, documentation and audit
  • Rights and obligations of the parties
  • Default of the parties
  • Force Majeure
  • Notices
  • Jurisdiction, term and termination
  • Appendix A. List of participating companies
  • Appendix B. List of services
  • Appendix C. Services excluded
  • Appendix D. Method of calculating service fee

The management services agreement (cost sharing agreement), if properly implemented and complied with, might serve as a sufficient evidence to comply with the transfer pricing requirements. Basically, it includes most of the transfer pricing attributes necessary to support the transaction.

The cost sharing agreement contains about 24 pages (approximately 5,500 words).Therefore, it is designed to cover a broad set of management services, however, it is easy to make it more brief, if required.