BEPS tax structuring

Tax burdens in the various countries where a company maintains a legal presence do not depend anymore merely on the jurisdiction where an entity is registered. What, then, actually triggers tax implications for a group of companies?

According to the OECD’s BEPS rules, it’s the location of:

  1. Management
  2. Key personnel
  3. Business’s functions and operations

Whatever organizational structure the group chooses, a certain amount of the group’s income tax base should be allocated to the jurisdictions where personnel with certain business functions reside, i.e. key R&D developers and managers, marketing and sales representatives, etc.

Therefore, thorough restructuring may require personnel relocation to support the selected business model.

We never drive restructuring solely by tax implications. During the first stage we ignore tax factors and focus instead on:

  • Your business development strategy
  • Legal concerns
  • Headcount expectations
  • Financial plans

Only then can we assess the costs and needs to modify the chosen models for greater tax efficiency. In this way we can better understand whether it’s worth transferring employees or functions to other countries.

To increase a group’s tax efficiency we factor in benefits and challenges associated with the application of preferential tax regimes in selected countries. IP/Patent box regime, R&D tax credits and super deductions, as well as other tax incentives and subsidies may actually end up decreasing the effective tax rate of the group.

During restructuring we typically provide recommendations for tax compliance with OECD’s  BEPS regulations that impact pricing mechanisms for intercompany transactions, such as potential pricing models and potential transfer pricing methods.