Successful integration within the analysis of potential value is the key to avoiding risk of Mergers and Acquisition, nowadays these topics are representing a challenge for MNEs.
One of the things that every M&A advisor should take into account when evaluating a M&A is the current International Tax Reform.
The International Tax World has changed. The economic purpose under which business structures were designed in the past became obsolete. Many companies had been designing strategical M&A structures over the last three years, but today, those structures are being exposed because of the deep changes on the International Tax Environment.
This is due to BEPS actions (Base Erosion and Profit Shifting) which were developed by OECD (Organization of Economic Cooperation and Development) in an ambitious plan which consists of 15 actions aimed to avoiding the base erosion and profit shifting between states or jurisdictions.
The BEPS action plan, specifically defined under actions 5 and 8 to 10, establishes that company structuring of the whole economic group, as well as their transactions between them, must be aligned with the value chain.
In this context, it is important to take into account the last tax reforms that affect M&A consulting, as they have to be in line with the concepts of substance, coherence and transparency.
In order to have success in M&A Integration, taking out the common precautions that every M&A advisor should have, you need to coordinate the integration of the companies according to International Tax Principles.
This occurs when the transaction and operation between companies are aligned with the value chain.
This last topic is the most important on the M&A Integration and sometimes the M&A advisors do not take it into account, because sometimes companies are unaware of the current circumstances taking place on the tax world.
Therefore, it is necessary to make a previous “Value Chain Analysis”, to determine whether the transaction are the ideal ones and whether they adapt to reality itself.
The benefits of a correct Value Chain Analysis, brings many benefits for the companies, firstly, the alignment of the functions performed by the company as a whole; As well as, the elimination of mismatches in the Master File and Local File, evaluation of BEPS Risks, reduction of Tax Audit risks and finally an effective compliance according to International Taxation Principles.
It is also necessary to clarify in this context that Value Chain Analysis, brings us a real vision of how thing are done within the company, i.e., the true impact of documentation on Transfer Pricing, against company policies, if the financial documentation is aligned with the business policies or if, on the contrary, they show a totally different reality.Back to Articles Back to Jennifer Ebrecht
The information provided in this article is for general information purposes only. The information is not intended to be comprehensive or to include advice on which you may rely. You should always consult a suitably qualified professional on any specific matter.
Jennifer Ebrecht is an International Tax Lawyer based in Costa Rica, she was born and raised in Argentina. Her practice concentrates on direct taxes, including tax planning, M&amp;A, BEPS, transfer pricing and cross-border investments in Latin-America. In June 2013 she won a public competition as a Tax researcher in the Tax Investigation Department of Argentinian Association of Fiscal Studies (AAEF). She obtained a Master Degree in International Taxation on Torcuato Di Tella University in Buenos Aires.
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