Cross service line collaboration
Nexia International’s Tax and TRI business groups collaborate to facilitate efficient restructuring driven by U.S. tax reform.
Prior to the enactment of the Tax Cuts and Jobs Act (TCJA) in December 2017, many U.S. businesses that operated as so-called “flow-through entities” (e.g. partnerships, S-Corporations and certain limited liability companies) organized their international operations to take advantage of qualified dividend income (QDI) planning. QDI planning generally involved the formation of one or more holding companies in jurisdictions that have tax treaties in force with the U.S. and utilise a territorial tax system (e.g. The Netherlands, Luxembourg, the UK, Ireland and Malta, among others). Such planning allowed U.S. owners of such businesses to be taxed at lower long term capital gains rates on distributions from non-U.S. subsidiaries.
The global intangible low taxed income (GILTI) provisions in the TJCA have, in many cases, resulted in QDI planning structures no longer providing U.S. tax owners of such businesses with the intended benefits. Many of these U.S. owners are or are considering restructuring their international operations to utilise a U.S. C corporation to hold their non-U.S. subsidiaries or to make a special election to be taxed as a C corporation on GILTI earnings. In these cases, the non-U.S. holding company structures may have become superfluous.
Companies that have or are planning to restructure as a result of the GILTI provisions may have an opportunity to streamline their structures by eliminating holding companies that no longer serve their purpose. Doing so will likely only make sense if such restructuring can be done without current tax cost and the implementation of such restructuring can be accomplished in an efficient manner.
Nexia international’s tax and TRI business groups have teamed up to assist clients in implementing restructuring of groups impacted by the TJCA and, in particular, those impacted by the GILTI provisions. Nexia professionals can assist companies in navigating the complex tax and regulatory regimes that may apply to such restructuring opportunities in a cost effective manner.
This process will allow a company or group of companies to be disposed of where they no longer serve a purpose which will save the ongoing costs of compliance ie auditing and being shown as a complex group structure.
For more information about these issues and the assistance Nexia can provide, please contact any of the following Nexia professionals.