Create an Intercompany Management Fee

An intercompany management fee is a charge that one entity within an organization imposes on another entity for management services provided. These fees typically cover administrative, operational, or strategic support services such as

Why Are Intercompany Management Fees Used?

1. Cost Allocation: Distribute shared corporate expenses among group entities.

2. Tax Optimization: Ensures that income is appropriately allocated across jurisdictions.

3. Transfer Pricing Compliance: Many tax authorities require intercompany transactions to follow arm’s-length principles to prevent profit shifting.

4. Transparency: Creates a clear record of services provided and the costs involved.

Before you start

Make sure the appropriate intercompany account exists. If not, follow the steps in📄 Creating an Intercompany Account

Create an Intercompany Management Fee

The walkthrough below is purely for example purposes. You will need determine the proper accounting treatment for your situation. If you are unsure of the proper treatment, please consult your accounting team or auditors.

In this example, Monsters Europe includes all administrative personnel. At the end of each month Monsters Europe charges the US and UK entities for their share of services, $20,0000 and $15,000 respectively, with a cost plus model.

Intercompany Accounts

In this example, we will use the following accounts:

• Management Fee Revenue (Intercompany Account)

• Management Fee (Intercompany Account)

• Due From US (Intercompany Account)

• Due From UK (Intercompany Account)

• Due To EU (Intercompany Account)

Create the Intercompany Entry

To create the intercompany entry:

1. Go to Close Management > Intercompany.

   
2. Select + Add Intercompany Entry.

   
3. Fill in the required fields in the Entry form:

   • Name: Management Fee

   • Date: Dec 31 2024

   • Customer/Vendor: blank

   • Currency: USD

4. Detail the From Entry Line Items

   • Subsidiary: Monsters Europe

   • Amount: $35,000

   • Account: Management Fee Revenue

   Enter the To Entry Line Items

   1. Subsidiary: Monsters US

      1. Amount: $20,000.00.

      2. Account: Management Fee

   2. Subsidiary: Monsters UK

      1. Amount: $15,000.00.

      2. Account: Management Fee

5. Review and Save the Entry

   • Click Preview Entry to review the information entered.

   • Click Create Entry to save the intercompany management fee in the system, if everything is correct.

   

Intercompany GL Impact