Lost in Transactions

BEPS’ impact on Mergers & Acquisitions

Your one-stop guide for everything you need to know about BEPS and M&A.

Have you considered whether your holding and financing structure is sustainable?

Driving the most significant changes to international business taxation since the 1980s, BEPS adds new complexity and uncertainty to all business operations, including when it comes to deal structuring and due diligence processes. BEPS is more than just direct tax, it impacts your HR and VAT policy or how you invoice clients in the digital economy. Are you able to identify and resolve inconsistencies between your planned value chain and how it works in practice?

This publication offers everything you need to know about the impact of BEPS on M&As. Whatever aspect of an M&A you’re involved in, this guide outlines the issues you need to be aware of and how they impact your area of expertise.

BEPS 15 action plan

The BEPS project began in 2013 when the G20 commissioned the OECD to analyse the global tax environment and issue proposals for the revision of existing tax rules. The initiative was initially driven by economic and political developments around whether MNCs pay their fair share of taxes.

The OECD released its 15 Action Plan in its final form end of 2015 around three themes of coherence, substance and transparency. Coherence aims to remove gaps and ‘black holes’ between jurisdictions. Substance seeks to align taxation with the economic reality. Transparency looks to provide additional disclosures to tax authorities.

 

 

"M&A is an opportunity to rethink the role of the tax function, using new technology and processes to make it future safe, enabling it to contribute fully to risk management, strategy, resource management and corporate branding."

 

 

Impact of BEPS on MNC’s and financial players

BEPS Actions Points will influence the way large MNCs organise their operations. Their challenge will be to align their value drivers and taxation with their operational and legal structure. Changes in approach will impact the entire MNCs value chain.

BEPS will not only affect MNCs, as it will have an even more dramatic impact on financial players. They will be impacted at the level of their portfolio as well as their funds, financing and holding structure. Traditional acquisition structures will need to be revisited and reshaped to rely on substance, transparency and arm’s length leverage.

Impact of BEPS diagram 1-5 steps visual

         

1 - Parent / TopCo

  • Place of management PE
  • Reporting and disclosure requirements
  • Transfer pricing documentation requirements, intra-group management charges
  • CFC rules in more jurisdictions

 

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2 - HoldCo

  • Hybrid financing
  • Treaty abuse

 

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3 - IPCo

  • Hybrid structures
  • Transfer pricing alignment with value creation and exploitation of intangible assets
  • Challenge to contract R&D arrangements
  • Substance

 

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4 - Principal

  • Alignment of substance and returns
  • Treaty abuse
  • Transfer pricing arrangements, particularly where residual profit is earned by the principal
  • Taxation of income from online/digital sales
  • Hybrid structures
  • Harmful tax practices

 

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5 - Local OpCo Increased tax aut

  • Increased tax authority aggression
  • PE
  • Commissionaire structures likely to be challenged
  • Increased disclosure
  • Threat of re-characterisation increases

 

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Contact us

Hugues Lamon
Partner
Tel: +32 (0)2 710 7405
Email

Philippe Estas
Partner, Transactions Lead
Tel: +32 (0)2 710 4041
Email

Nancy De Beule
Partner, M&A Tax Leader Belgium
Tel: +32 (0)3 259 3125
Email

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