Not every cost the parent pays is a cost the children owe. A UAE holding company runs a group audit and splits the fee across three subsidiaries. Nobody objects. Everything looks tidy on the recharge schedule. But look one level deeper.
The group audit exists so the parent can present consolidated numbers to its own investors and its own banks. The subsidiaries are already audited separately for their own regulators. The parent is doing this because it owns the shares. Not because a subsidiary asked. That is shareholder activity, and it belongs on the parent’s own books.
Costs that serve ownership stay with the owner. Costs that serve the operating company can travel.
Costs that serve ownership stay with the owner
The rule of thumb is easier than it sounds. Board and shareholder reporting, group listings, consolidated audits, investor relations, and most compliance driven by the parent’s own filings — all shareholder activity. Common services the subsidiary would otherwise buy from a third party is where an intra-group service charge can genuinely sit.
A useful test at the board table: if the subsidiary had been a stand-alone company, and the parent had sent it this invoice by post, would the subsidiary have paid it without a phone call? If the honest answer is no, keep the cost at the parent.
Which List Does the Cost Belong On
Board and shareholder reporting, group listings, consolidated audits, investor relations, and compliance driven by the parent’s own filings. These exist because the parent owns the shares — not because any subsidiary asked for them.
Common services the subsidiary would otherwise buy from a third party. If a stand-alone company would have paid the invoice without question, it belongs on this list.
The cleanest fix is quiet
Split the recharge policy into two lists. Costs the parent absorbs because it is the owner, and costs the parent genuinely provides as a service to the subsidiary. Review the split once a year, with the auditor in the room, and let the intercompany invoices flow from that list.
Getting the Recharge Policy Right
01.Split the Policy Into Two Lists
Shareholder costs the parent absorbs, and genuine services the subsidiary would buy anyway.
02.Review the Split Once a Year
With the auditor in the room, so the classification holds up before a regulator ever asks about it.
03.Let Invoices Flow From the List
Once the list is settled, the intercompany invoicing becomes a formality, not a judgment call each time.
Ask a harder question of your own group. Where is the parent quietly using the children as a cost sink?
