Difference between Intercompany and Intracompany in SAP

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Intercompany vs Intracompany in SAP

InterCompany

Transactions are between two or more related internal legal entities with common control, i.e. in the same enterprise (Inter = Latin for “BETWEEN”)

IntraCompany

Transactions are between two or more entities within the same legal entity (Intra = Latin for “WITHIN”)

Well the real difference is that Intracompany processing is determined by company management, whereas Intercompany has to follow the law.

The amount the R&D department pays the manufacturing department of the same LE for some test chips(of the silicon kind) is to be sorted out between themselves. However when my manufacturing company in Ireland sell chips to their sister company in Germany you can imagine the tax authorities care about how much they charge because they get a % of it in taxes. This what transfer pricing is all about, it is important to get it right and you need to follow the rules and be prepared to open up your books to the tax people to demonstrate you followed the rules.