ccntconsulting

Careful tax planning is critical for business success in an unpredictable global economy. Tax planning is also necessary for individuals who face their own challenges owning, managing and preserving businesses and wealth in a complex regulatory environment. That being said, tax planning is far from being just a matter of accounting considerations in a single country. The effects of adjustments in one country on the accounts and ratios in another cannot be ignored. This is even more true of organizational and structural planning. Choosing the right legal form for the given function can be as important as setting the right structural and organizational background for the given transaction flow. Involving us can infuse a project with the knowledge borne of wide national and international experience needed to design policies and processes to meet the demands of today and tomorrow.

What your group does, and where it operates, matter for tax purposes. The separation between the territory where the head office is located, and the territories where operations are located are commonly different. But this creates a tax audit risk. Tax authorities want profits to be taxed where the people and value creating activities are, and the consequences can be expensive! What tax substance questions should be considered?

Are your holding companies tax resident in the expected jurisdiction? Have you implemented good procedures and gathered documentation to prove it?

Entities can become tax resident where they are managed and controlled (rather than simply incorporated). In testing this, tax authorities increasingly scrutinise the substance of decision making, rather than the rubber stamping of decisions in board meetings. Dual resident entities can often be denied tax treaty benefits – creating the potential for double taxation. This also creates uncertainty over the appropriate taxation regime for the entity – with implications when restructuring, on audit or when under due diligence.

What is the substance within your holding and finance companies? Are you up to date on all local and international substance-related changes that might impact the expected tax treatment of these companies?

New anti-avoidance rules around the world can neutralise the tax benefit of using shell companies with no substance. For example, a European draft Directive (known as ATAD 3) is expected to come into effect in the next few years introduces a prescriptive rule-based approach to assessing an entity’s substance. It focuses on the level of active (rather than passive) income, the level of international income and evidence that the company is managed in-house with its own or shared employees. It is not yet clear how each EU member will implement these rules, but the downsides of failing the tests could include being denied the benefits of double tax treaties.

Does your transfer pricing align with your business? Where are potential risk areas that a tax authority could challenge?

Following the OECD’s anti-base erosion and profit-shifting initiative, tax authorities are very focused on checking that transfer pricing models align with the economic substance of the entity. This often includes testing whether fees for various activities and other services truly reflects the location of value creating activities. Also, tax authorities will look at group funding to ascertain whether the characterisation and pricing of related party debt funding (and interest on it) is supportable from a tax and transfer pricing perspective.

Do you have entities tax resident in ‘haven’ jurisdictions that have introduced economic substance rules? Are you comfortable you are complying with these rules?

Many low-tax jurisdictions have introduced rules that require clear evidence of economic substance in their jurisdiction. Failure to comply can lead to penalties and being struck off the local register. This is driving many international groups to make operational and personnel changes to be sure they meet these requirements. Groups may also decide that their presence in the haven jurisdiction is no longer justified and restructure accordingly.

Do your holding companies have enough substance to register for VAT or is there potential for irrecoverable VAT costs?

It is common for holding companies that the time between raising finance and earning substantial operational returns can be significant, and there may be limited ability to charge out any services and earn a business return in this period. This means they can struggle to prove sufficient activity to allow them to register. As a consequence, recovering VAT on acquisition costs is a constant source of challenge from tax authorities.

Particular problems can arise when a holding company does not provide services for consideration to all its subsidiaries, payment for services provided to subsidiaries is contingent, or there is insufficient substance to the services (e.g. the holding company has no employees).

What reputational damage could scrutiny of your entity structure cause?

Public scrutiny of international groups’ tax affairs is higher than ever, and the media are keener to highlight groups that are seen as not paying their fair share of tax. This is heightened in the current environment where approaches to environmental, social and governance issues is so important.

Adverse media coverage can affect groups bidding for local licenses and contracts, as well as impact how a group is seen by stakeholders including tax authorities, customers, suppliers, employees, shareholders, governmental and non-governmental organisations. Unsurprisingly, boards are looking to their finance functions to ensure that the group’s tax compliance is beyond reproach.

• Planning and preparation to minimize disputes
• Documenting and preparing evidence and defense files
• Reviewing and finalizing strategic controversy-aware policies
• Bilateral and multilateral advanced pricing agreements (APAs)
• Advanced rulings and unilateral APAs
• Pre-transaction engagement with tax authorities
• Obtaining and negotiating tax authority rulings

• Tax authority inquiry handling and closure
• Negotiation with tax authorities
• Analysis, economic and technical support
• Appeal and litigation support
• Mutual agreement procedure (MAP) and arbitration support

Tax controversies typically are unique, urgent, and inconvenient. Without proper guidance and coordination organizations can spend enormous amounts of time and resources addressing tax disputes. In today’s tax landscape, where authorities investigate technical merit and analysis as well as implementation and motive, you need experienced, knowledgeable specialist to provide a detailed and customized solution.

ccntconsulting’s tax controversy team has accumulated wide range of skills and experience throughout the tax dispute resolution cycle representing and/or supporting various multinational enterprises. The experience accumulated includes domestic corporate income tax, international tax and transfer pricing.

However, the best strategy is to mitigate the impact of tax controversies through utilizing ruling system; support for international treaty procedures; application of advanced pricing agreements (APAs), and other such tools.

• Tax diligence to identify and manage both historical and potential future tax exposure
• Development of an acquisition structure in line with your commercial objectives and strategic business plans
• Tax modeling services
• Post-deal services to assess readiness and understand go-forward tax implications

• Assessment of “exit readiness”, asset perimeter and assessment of the design of pre-transaction restructuring plans
• Development of transaction plan in light of likely buyer pool and particular commercial profiles of potential buyers
• Identification of further opportunities to manage tax attributes
• Implementation support and post-deal services

• Identification of tax measures relevant to the transaction (e.g., managing use of tax attributes and assessment of the availability of tax exemptions)
• Identify immediate opportunities to provide liquidity or relief (e.g., debt restructuring)
• Design of restructuring plans and assessment of restructuring alternatives

M&A transactions have grown larger and more complex than ever. Whether it is an acquisition, divestiture, or restructuring, understanding also the diverse tax implications associated with transactions are becoming more important.

Without question, we are living in a time of change and uncertainty. Disruption has impacted every aspect of our lives, including the way we do business. 

In this environment, the capacity to embrace transformation is critical. Whether that means responding rapidly to assess immediate challenges or revising and executing your strategy against a backdrop of continued unpredictability, it is imperative to respond to change with a flexible and resilient mindset.

At the same time, the issues that you care about are often unique to your business. Understanding all the potential tax implications of a given transaction requires extensive deal and business experience.

We ensure that your transfer pricing model is aligned with the value chain of the group and other operational aspects of your business. The result is the definition of efficient measures to reduce your potential tax risks.

We help you develop transfer pricing strategies according to the
arm’s length principle.

We work with you to develop a transfer pricing model that is best aligned with your company and ensure its successful implementation. The creation of a transfer pricing guideline completes this step.

We support you in transferring the transfer pricing guideline into operational use and to create a practitioner’s guide to processes, organization, and IT. Our “end-to-end” assistance in developing processes, responsibilities, and controls as part of a tax compliance management system.

We help with the system-based implementation of the transfer pricing model, from setting transfer prices to margin monitoring and, if necessary, correcting the transfer price.

Our transparent and efficient approach to documenting intercompany transactions helps you to meet EU and Slovak tax requirements and avoid risks.

Our support of you and your company in tax audits, Advance Pricing Agreements (APAs), mutual agreement procedures, arbitration, and tax court proceedings.

Transfer pricing is an important tax and management topic for multinational groups. Tax and transfer pricing regulations play a central role when multinational companies apply their intra-group pricing arrangements on a global basis. Increasingly extensive documentation, additional transparency and stricter penalties demand a regular review of the transfer pricing policies of both domestic and multinational groups.

A tailormade transfer pricing strategy and its successful implementation in compliance with the arm’s length principle is therefore a must for companies with intra-company activities, for example if the organization:

• intends to change its business model.
• envisages expanding into new markets.
• the OECD or local legislators adopt new regulations, for example on financial transactions between associated companies or on intangible assets.

ccntconsulting’s transfer pricing team has accumulated wide range of skills and experience throughout the whole transfer pricing process starting with the transfer pricing value chain analysis, through planning and designing, implementation of operational transfer pricing and ending with transfer pricing compliance and defence.

In a highly globalised world, multinational companies are constantly involved in cross-border projects, from sale of goods or supply of services, to tax structuring projects to achieve a competitive effective tax rate, streamline cash and financing needs, or prepare for an M&A transaction with third parties.