Opening up to the international market for a company can entail significant tax implications, such as exit charges and asset valuation challenges, and trigger tax liabilities under local laws and challenges to the new Transfer Pricing regulations.
The global economic situation has been showing severe alterations and drastic changes in fiscal and tax policies to the extent they relate to foreign company transactions, highlighting the “tariff war” among the world’s major powers.
Therefore, multinational corporate groups had to implement corrective measures to maintain the dynamism of their businesses and competitiveness levels, anticipating every tax change affecting their business development, particularly aligning with the OECD1 provisions in the BEPS2.
Tax Implications of Restructuring
The opening to the international market may result in:
- Exit charges: Payments required upon ceasing certain economic activities within corporate groups, according to the Transfer Pricing regulations.
- Revaluation of assets: It needs to value transferred functions, assets, and risks, which may generate tax gains or losses.
- Delimitation of functions: Concise identification of the roles performed by each part of the company’s value chain.
- Regulatory compliance: Adaptation to local tax laws and the Transfer Pricing rules to avoid penalties.
Key Considerations to Keep Under the Arm’s Length Principle
In order to comply with the Transfer Pricing regulations and stay ahead of its basic principles, you should consider:
- Evaluate tax implications: Analyze the restructuring effects on the tax burden in each jurisdiction.
- Proper documentation: Maintain detailed records to support decisions and valuations made.
- Consult with experts: Seek specialized advice on Transfer Pricing and international taxation.
How Can TPC Group Help?
At TPC Group, we have an expert Transfer Pricing and international tax team at your disposal on corporate restructuring processes, ensuring regulatory compliance and optimizing your tax position. Contact us for a customized consultation.
Source: ITR