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Cost Allocation Agreement

Cost Allocation Agreement Template for United Arab Emirates

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Key Requirements PROMPT example:

Cost Allocation Agreement

"I need a Cost Allocation Agreement for our UAE-based technology group's shared services center that will serve five subsidiaries across Dubai and Abu Dhabi free zones, with particular focus on the new corporate tax requirements and transfer pricing rules effective January 2025."

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Document background
The Cost Allocation Agreement is essential for businesses operating multiple entities in the UAE, particularly in light of the introduction of corporate tax and enhanced economic substance requirements. This document is typically used when multiple entities within a group share common services, facilities, or resources and need a formal framework for allocating these costs fairly and transparently. It becomes particularly relevant for UAE businesses with shared service centers, regional headquarters, or multiple operating entities across mainland UAE and free zones. The agreement must carefully consider UAE's tax regime, transfer pricing requirements, and VAT implications while providing clear methodologies for cost identification, allocation, and settlement. This document typically includes detailed schedules for cost categories, allocation keys, and reporting templates to ensure compliance with UAE regulatory requirements and group policies.
Suggested Sections

1. Parties: Identification of all participating entities, including registration details and addresses

2. Background: Context of the agreement, relationship between parties, and purpose of the cost allocation arrangement

3. Definitions and Interpretation: Definitions of key terms, interpretation rules, and currency conventions

4. Scope of Agreement: Detail of services/costs covered, excluded costs, and territorial scope

5. Cost Pool Definition: Description of costs to be shared and criteria for inclusion in cost pool

6. Allocation Methodology: Detailed methodology for calculating and allocating costs between parties

7. Payment Terms: Timing, method, and currency of payments, including true-up procedures

8. Books and Records: Requirements for maintaining documentation to support cost allocations

9. Tax Compliance: Provisions ensuring compliance with UAE tax laws, VAT requirements, and transfer pricing regulations

10. Audit Rights: Rights of parties to audit cost calculations and supporting documentation

11. Term and Termination: Duration of agreement and circumstances for termination

12. Governing Law and Jurisdiction: Specification of UAE law as governing law and jurisdiction for disputes

Optional Sections

1. Service Level Requirements: Used when specific service levels need to be maintained as part of the cost allocation arrangement

2. Intellectual Property Rights: Include when shared costs involve development or use of intellectual property

3. Confidentiality: Detailed confidentiality provisions when sensitive cost information is involved

4. Force Majeure: Include when parties want specific provisions for handling cost allocation during extraordinary events

5. Change Control: Used when formal procedures for changing allocation methodologies are required

6. Parent Company Guarantee: Include when parent company backing is required for payment obligations

7. Economic Substance Compliance: Specific provisions for ensuring compliance with UAE Economic Substance Regulations where applicable

Suggested Schedules

1. Schedule 1 - Cost Categories: Detailed list and description of cost categories included in the arrangement

2. Schedule 2 - Allocation Keys: Specific allocation keys and calculations for different types of costs

3. Schedule 3 - Excluded Costs: List of costs specifically excluded from the arrangement

4. Schedule 4 - Form of Invoice: Template for invoices and supporting documentation

5. Schedule 5 - Contact Details: Key contacts for each party for operational and administrative matters

6. Schedule 6 - True-up Procedures: Detailed procedures for periodic reconciliation of estimated vs actual costs

7. Appendix A - Sample Calculations: Examples of cost allocation calculations for reference

8. Appendix B - Reporting Templates: Standard templates for regular cost reporting and reconciliation

Authors

Alex Denne

Head of Growth (Open Source Law) @ ¶¶Òõ¶ÌÊÓƵ | 3 x UCL-Certified in Contract Law & Drafting | 4+ Years Managing 1M+ Legal Documents | Serial Founder & Legal AI Author

alex.den.21@genieai.co
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Relevant Industries

Financial Services

Professional Services

Manufacturing

Retail and Consumer

Technology

Energy and Resources

Healthcare

Real Estate and Construction

Logistics and Transportation

Hospitality and Tourism

Relevant Teams

Finance

Legal

Compliance

Tax

Treasury

Accounting

Corporate Services

Shared Services

Operations

Commercial

Relevant Roles

Chief Financial Officer

Finance Director

Tax Director

Legal Counsel

Compliance Officer

Financial Controller

Group Accountant

Treasury Manager

Corporate Services Director

Shared Services Manager

Operations Director

Commercial Director

Industries







Teams

Employer, Employee, Start Date, Job Title, Department, Location, Probationary Period, Notice Period, Salary, Overtime, Vacation Pay, Statutory Holidays, Benefits, Bonus, Expenses, Working Hours, Rest Breaks,  Leaves of Absence, Confidentiality, Intellectual Property, Non-Solicitation, Non-Competition, Code of Conduct, Termination,  Severance Pay, Governing Law, Entire Agreemen

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