A key part of Fisconti’s tax advice services relate to business restructurings; the process of changing the way how a compnay runs it business (e.g. changing its trading model). Such efforts may be prompted by the need to integrate or relocate business units in the wake of a merger or acquisition, or the desire to manage the company’s activities more efficiently. Such changes can have major fiscal consequences, especially if multiple companies and/or countries are involved.
Business restructurings, such as supply chain projects, may involve the transformation of manufacturing companies into contract manufacturers or toll manufacturers. Under the new situation, the manufacturing companies will produce products for another group company (the principal) rather than themselves. In many cases, such transformations involve the introduction of more standardised sales and customer invoicing processes (such as invoicing from a single location). Local sales offices are then converted into sales agents or distributors, subject to limited risks.
Two key aspects are crucial during such reorganisation processes. Firstly, it is important to determine whether the restructured manufacturing or sales company will be required to obtain an indemnification for the functions and/or risks that have been transferred within the group (in the form of goodwill settlements, for example). Secondly, it is important to determine whether the principal will be liable for foreign tax on the profits that it wil generate through the foreign subsidiary.