Taxation

801 Words Mar 20th, 2015 4 Pages
How would you handle the case and what aspects would you consider in the evaluation of the restructuring?

In this essay, I will address why it is in The Group’s main interest to support the Tax Director’s decision about restructuring the company and re-incorporating The Group’s headquarters from US Inc. to the newly incorporated UK PLC, which would be the new holding company. As a result, the distribution functions of European subsidiaries would be centralized in the newly incorporated company based in Switzerland (SWISSCO.) Through identifying and considering all the variables, I will evaluate the restructuring of the company. My conclusion is supported by a number of variables and only applies if all the variables mentioned are
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The Group will be moving from a high income tax rate (US) to a low tax rate (UK). In addition to the restructuring it would shift from a worldwide system to a territorial system, which means that as a resident company it would be subject to tax in respect of income derived from the source of income. Furthermore, in relation to domestic rules there is only moderate CFC legislation in the UK and taxation of passive income when it comes to dividends.

Evaluating the options:

By taking into account the non-tax and tax reasons, we are able to identify that there are positive incentives to the restructuring of The Group. However, we must consider all the changes comprised in the decentralization of US Inc. to UK PLC. As CFO of The Group, I must evaluate that there is a smooth shift in management into the UK’s new headquarters. Regarding tax aspects, the centralization of the new HQ (UK) will lead to a transfer of activities: all routine-based activities will be assigned to high tax jurisdictions and value-added activities will be assigned to low tax jurisdictions. The centralization of the business unit will be transferred to the UK, for example: supply chain, financial services, intellectual property and marketing activities. The transfer of all strategic roles and

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