The OECD BEPS Action Plan and parallel developments impact each layer of a multinational structure, including the upper tier. Specifically, having insufficient relevant substance at upper tier level could cause your return on investment to decrease significantly (by up to 25% based on the current Belgian withholding tax rate).
On top, we expect that the tax authorities might have a closer look at:
- existing large value chain transformation (‘VCT’) programs which MNCs use to organise their operations around large regional or global trading hubs located in key jurisdictions (principal companies and/or R&D centres); or
- existing financing structures.
A successful (future) challenge of those structures could result in profits of a headquarter/financing centre being reallocated to the operational/borrowing entities – which are often subject to higher (effective) tax rates.
For more insights on upper-tier related attention points in an acquisition and status quo context, read our entire contribution here follow our next publications on BEPS in M&A, which will each focus on a more detailed aspect of the Transactions continuum.