A sale, purchase, loan or recharge between two entities in the same group, which must be recorded on both sides.
An intercompany transaction is any dealing between two companies under common ownership: one entity selling goods to another, a holding company lending to a subsidiary, shared staff costs recharged across licences, or one company paying a supplier on behalf of another. Each side must record it, and the balances between entities must agree.
It matters because UAE corporate tax requires related-party transactions to be at arm's length and documented, and VAT may apply to intercompany supplies between separately registered entities. Groups that treat intercompany as a loose running balance find it does not reconcile at year end, which delays audits and creates tax exposure.
In an ERP project, set up intercompany partners and accounts explicitly, and where the platform supports it, automate the mirror entry so a sale in one entity creates the purchase in the other. Agree transfer prices and recharge rules before go-live. Reconcile intercompany balances monthly, since this is where consolidation and corporate tax reviews most often stall.
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