From time to time, international corporate structures require a review, due to changing circumstances within the organization, or changes in law. In the international area, these changes occur more frequently, due to the number of countries which are involved, and possible amendments to the international tax treaties between them. Also, tax planning opportunities may arise from a variety of factors including, for example, the expansion of the European Union.
ITSG members are very experienced in evaluating an international group structure, to make sure that it is as efficient as possible, and subject to the lowest reasonable tax burden, while maintaining the legitimacy of the structure from a business perspective and a low-risk profile if challenged by a revenue authority.
In undertaking such a review, the following steps would typically be taken:
- A review of the existing structure.
- An understanding of the long-term goals of the corporate group, particularly with respect to expansion of the group, possible acquisitions, where profits are earned, and possible divestiture plans.
- A review of the tax rates applicable to the group at present, including both corporate income tax rates, rates of withholding, and the tax cost on repatriation of profits to the parent company.
- From here, a list of recommendations is developed for possible improvements to the structure, to reduce the overall corporate income tax rate, reduce rates of withholding, increase the efficiency of profit repatriation, optimize sales tax and customs duty, and reduce the risk of challenge by revenue authorities (for example, by considering changes to inter-company pricing models to reduce exposure to transfer pricing adjustments).
- A report will be prepared for discussion with senior financial officials of the corporation, containing the recommendations, and a plan for implementation of them.
- ITSG members are able to implement the recommendations proposed, to assist in restructuring the corporate group, should that be necessary, and to provide ongoing services to monitor the tax position of the group.