Business restructurings by multinational companies have attracted increase scrutiny of tax authorities in recent years. Besides relocation of functions, business restructuring also includes conversion of businesses, for example the conversion fully-fledged distributors into limited-risk distributors or the conversion of fully-fledged manufacturers into contract-manufacturers.
These new developments will require companies to involve more analysis and documentation when deciding to restructure. The Altus Network can assist to identify taxable events and perform independent valuation studies to support the business restructuring in order to avoid or limit additional exit charges. It should be noted that tax authorities have increased their emphasis on conversions of functions and risks rather than the traditional rationalisation of operations.
Examples of Business Restructuring
The OECD proposes that business restructuring be defined as the cross-border redeployment by a multinational enterprise of functions, assets and / or risks and refers to the following types of business restructurings:
- Conversion of fully-fledged distributors into limited-risk distributors or commissionaires for a related party that may operate as a principal,
- Conversion of fully-fledged manufacturers into contract-manufacturers or toll-manufacturers for a related party that may operate as a principal,
- Rationalisation and / or specialization of operations (manufacturing sites and / or processes, research and development activities, sales, services),
- Transfers of intangible property rights to a central entity within the group (i.e. a so-called “intangible holding company”).
Types of services
The Altus Network has broad experience in assisting clients with, among others, the following business restructuring services:
- Transfer pricing consultancy services with respect to all types of conversion / migration projects
- Documentation of Business Restructurings
- Tax-efficient structuring of conversion and migration scenarios. This includes the preparation of detailed financial modelling (if required based on internal ERP systems) to support such tax efficient structuring
- Exit tax calculations
- Post merger refinement of the transfer pricing structure which may include adjustments to existing royalty structures and inter-company service fees
The Altus Network global coverage enables our clients to address the various approaches of local tax authorities as well as OECD guidelines when providing you with business restructuring support.