Unified tax structure brings synergy in the company

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Today's environment is characterised by signi- ficant cross-border investments and transactions by Indian companies. As Indian businesses become more complex with the global nature of operations, so do tax planning and compliance. This necessitates a comprehensive tax strategy that is aligned with the operations and seeks to achieve a lower worldwide effective tax rate within an acceptable risk matrix.

Overseas acquisitions would result in multiple entities in the group carrying multiple functions across various jurisdictions. Taking a simplistic example, let’s suppose that there is an Indian company engaged in a manufacturing business, having a customer base within and outside India. The company has developed a considerable amount of expertise in its business over a period of time and is recognised as one of the pioneers in its field. To acquire new capabilities, it has made acquisitions and has subsidiaries in the US, the UK, France and Germany, engaged in activities like manufacturing, distribution and R&D and having various customer relationships amongst themselves. Thus, after these acquisitions, the group has various capabilities within and outside India.

Undoubtedly, a coordinated working amongst these entities will enable the group to achieve synergies. In this situation, it would be important to examine what would be the distribution of functions and risks amongst the group entities, who will do what, who would enter into customer contracts, how would these be structured, and whether certain key functions, assets and risks should be centralised in a particular jurisdiction to achieve a better coordination, control and management.

Certain issues to be considered would be as follows:

* Whether all the IP in the group should be centralised in a particular jurisdiction for better management and control?

* Whether the overall control and management including all the key strategic functions, say for the European operations, should be centralised in a particular jurisdiction?

* Whether shared service centres should be established to service al l entities for common processes?

* How can various entities leverage from the best practices of each other?

* Should there be a movement of key personnel to centralise such functions in a particular jurisdiction?

* Whether any entity in the group, which was a full-fledged manufacturer earlier, should now be a contract manufacturer for better management and control and how can this be achieved? Should the distribution activities be similarly restructured?