In multinational groups, business restructurings among related parties are becoming increasingly frequent—ranging from shifts in business models and centralization of functions to the migration of intangible assets and the transformation of subsidiaries into service providers.
The Tax Implications of Business Restructurings
As highlighted in the OECD Transfer Pricing Guidelines 2022, business restructurings can have significant tax implications whenever they involve the transfer of economic value. This makes it essential to analyze:
- When a restructured entity gives up valuable functions or rights
- When a restructuring involves the transfer of tangible or intangible assets
- And whether compensation should be granted for such a restructuring.
Evaluations must be made under the arm’s length principle, assessing what an independent party would have agreed to under comparable conditions. This includes conducting a functional analysis both before and after the restructuring, and determining— with clear justification—whether compensation is warranted.
Written by: Iván Olivera
