Economic issues in the OECD draft report on business restructurings
November 25, 2008
Paul Flignor and Alan Granwell of DLA Piper investigate four of the major economic considerations for companies as a result of the OCED draft report.
Multinational corporations have sought to restructure their business model for operations outside of their home jurisdiction in order to meet the challenges of the new global economy. One common planning strategy entails centralising in a company referred to as the principal company, often resident in a tax friendly jurisdiction, overall responsibility for managing and conducting a business segment, including R&D, manufacturing, distribution and associated services rather than conducting business abroad through separate locally incorporated entities that manufacture and sell. These types of business restructurings, have come under close scrutiny by the tax authorities of countries whose taxpayers have migrated assets, functions and risks to a principal company because of the sharp decline in the revenue base of the companies that have undergone a business restructuring.
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