Are you considering restructuring or closing operations?
While transfer pricing is often not considered when companies make changes to business operations, the Canada Revenue Agency continues to focus on the compensation due to a Canadian entity where its business activities have been restructured. Related CRA proposals tend to be time-consuming and costly to defend. Upfront planning and advice may help mitigate costly CRA audits in the future.
We can help you review and document the facts and circumstances surrounding your company’s decision to change its business operations in the context of the arm’s-length principle. We also review the treatment of costs associated with the actual changes to operations and any associated transfers of intangibles or other assets.
Captive insurance diagnostic
Is your company interested in setting up a group captive insurer? Are you concerned about the risks associated with an existing offshore captive?
A captive insurance company is typically used as a vehicle to improve risk management, decrease insurance costs and increase cash flows. With the right planning, a captive may also generate certain tax benefits. Our captive insurance team includes risk managers, actuaries and Canadian and international tax specialists and can provide holistic consideration of the viability of a captive and how your company can generate maximum benefits from using one.
In addition, the foreign affiliate rules are complex and it can be difficult to identify potential material tax risks in an existing offshore captive insurance structure from a corporate tax, transfer pricing and international tax services perspective. Companies may be overlooking these risks or not addressing them comprehensively. Our team can help you identify potential tax risks of your existing offshore captive insurance structure at a high level.
Financial transactions pricing (intercompany debt, interest and factoring rates and guarantee fees)
Does your company have formal or informal arrangements involving loans or debt guarantees within a group?
A company that borrows funds from a related party must be able to show that the amount and terms of the debt are arm’s length. This requires consideration of numerous factors, including current market conditions and the financial position of the borrower. Companies may not have easy access to the data required to perform a robust analysis.
We help your company determine an acceptable level of debt, for which tax relief on interest should be available, together with appropriate terms. We also help determine arm’s-length interest/factoring rates and guarantee fees and prepare related reports and analyses that can be tailored to your company’s needs (through either a high-level review or a more in-depth analysis).
Intellectual property pricing
Is your company engaged in related-party cross-border transactions involving intellectual property such as patents, know-how, trademarks and other intangibles?
Pricing intellectual property (IP) that may be used by numerous companies in a group presents a difficult scenario that requires expertise and judgment, especially where prices may need to change over time (if, for example, the IP is gradually becoming obsolete and its value is falling). IP pricing and analysis will need to consider current guidance from the Organisation for Economic Co-operation and Development on ownership and valuation, which includes important changes to IP valuation.
We can help by reviewing and discussing your company’s IP transactions and possible approaches to pricing methodologies. The discussion may be followed by detailed analysis of the transactions to develop appropriate pricing strategies.
Enabling tax-efficient business change
In order to remain competitive, companies need to continually evolve and re-examine their business models, expand their geographic footprint, integrate acquisitions and transform their operational structures. Further driving the need to change are legislative adjustments, a mobile labour force and new technology developments. Our Value Chain Transformation™ (VCT) services are designed to help you transform your business in a tax-efficient manner so you can stay ahead of the competition, increase shareholder value and improve cash flow.
Adopters of the procurement buy-sell model could see a 50% increase in profit margin resulting from a 5% reduction in purchase costs.
VCT is designed to help multinational corporations transform the way they do business at every step of the journey, from initial strategy through final delivery, in a tax-advantaged manner. So whether you’re expanding to another region, centralizing services into shared-service centres, moving your manufacturing operations, considering IP strategies or restructuring your supply chain, our VCT team can help. Our experience, industry knowledge and expertise in supply chain management, cross-border personal taxes, transfer pricing, value-added tax (VAT) and customs duties and the intricacies of the international tax system will help you meet your business transformation goals in a timely and cost-efficient manner.
How we can help
- Conduct feasibility assessments
- Determine where and how best to locate regional or global hubs in a tax-advantaged manner
- Improve IP planning
- Improve the tax efficiency of post-merger integration and harmonization
- Create sustainable structural tax improvements
- Maximize cash flow from a VAT and customs perspective
- Document compliance with local and international tax laws and OECD guidelines