Tax-structuring a cross-border acquisition

Issue

In order to maintain its global market position, SuperChainCo needed to rapidly expand internationally through inorganic growth.

As a result, it reinforced its European operations by means of a highly leveraged acquisition of its 4th competitor.

The company asked PwC to put a tax-efficient structure into place for its new acquisition.

Approach

To implement a tax-efficient acquisition structure, key steps were defined to achieve the highest potential tax savings.

	Criteria
	No capital duties Low corporate tax rate Tax exemption on dividends Capital gains tax exemption
	Debt push-down via tax consolidation, equity stripping or merger Double interest relief through either hybrids or financing centres No withholding tax on interest Avoid thin-cap rules and CFC legislation Ease of servicing debt

Recommendation

PwC recommended that either existing SuperChainCo Group companies or newly set-up acquisition vehicles should acquire the Target group companies in each jurisdiction.

Results

Based on PwC’s recommendation, SuperChainCo implemented an acquisition structure ensuring double tax relief for the interest expense on the acquisition debt against the operating income of the Target companies. This was achieved by using among others a Belgian notional interest deduction company.