We can assist in the following areas of telecoms tax planning and re-structuring:
Post-acquisition tax planning and re-structuring
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Re-organising the tax structure of the acquired telecoms company to ensure the tax benefits are preserved as to:
· Sales
· Service companies / LBUs (Local Business Units)
· Ownerships of IRUs (Indefeasible Rights of Use)
· Operations & infrastructure
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Tax pros and cons of holding acquired company via a newly formed Holding company.
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Establishing intermediate companies to reduce the tax burden post-acquisition.
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Operational issues affecting re-financing of underlying business.
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Identifying and dealing with transfer pricing issues.
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Dealing with VAT issues.(see below).
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Dealing with withholding tax issues on royalty payments etc.
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Reviewing tax efficiency of contractual arrangements (e.g peer-to peer agreements).
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Reviewing availability / deferral of tax reliefs.
Value Added Tax (VAT) issues
* Use a centralised or de-centralised tax structure for VAT administration.
* Benefits of centrally managing EC Eighth Directive VAT refund claims.
* Using a Clearinghouse approach to manage VAT administration, inter-company accounting and foreign exchange exposure.
* Reverse charge VAT accounting (Article 9 2 e of EC Sixth Directive) within the EU.
* VAT issues arising within the newly enlarged EU – the VAT complications arising in the 10 new Member States – derogations and transitional provisions.
* VAT aspects of supply and install contracts.
* Avoiding non-recoverable VAT.
Transfer pricing issues
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Functional analysis and selecting comparables on basis of functions, risks, assets and capital analyses as to group activities in terms of:
· Sales and distribution
· Product and market risks
· Marketing intangibles
· Network services
· Research and development
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Valuation issues.
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Intangibles: ownership, cost and exploitation.
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Joint venture issues: cost sharing, R&D, licencing and customer management.
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Onshore v Offshore R&D, licensing, etc.
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Review of services provided by HQ or parent company.
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Pros and cons of entering APAs (Advanced Pricing Agreements).
Telecoms operating structures
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De-centralised v centralised structures.
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Decentralised structure: LBUs take the commercial risk of operating their portion of global network.
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Centralised structure: Single legal entity assumes commercial risk of operating the entire global network.
Decentralised structure
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Decentralised structure: LBUs own the telecoms switches, employ local sales forces and network staff and sign contracts locally. Incorporating LBUs in form of local subsidiaries avoids tax problems such as Permanent Establishments.
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Tax treaty considerations for location of holding company owning the LBUs.
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Thin capitalisation (debt/equity), capital duty and stamp duty issues.
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Central treasury management.
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Network cost sharing issues:
· Managing LBUs serving as hub sites incurring additional network capability and costs for the transit affiliates traffic flowing through.
· Allocation of backbone costs
· Managing transit costs on basis of origination and termination of calls.
* Structuring network cost allocations in terms of buy/sell, re-imbursement of expense or cost sharing arrangement.
Centralised operating structure
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Parent company decides to centrally manage network operations. LBUs will be responsible for growing local market share. Parent Co will capture network cost in a single entity and create a network company.
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Location of network company from tax point of view.
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Complex VAT and transfer pricing issues.
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Impact of centralisation on Production and Distribution.
HR and other issues
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Processing international payrolls.
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Processing work permits and visas.
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Re-structuring from the HR point of view: assessing the roles and responsibilities, achievements and corporate objectives.
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International assignments: travel policy, tax-efficient compensation and benefits, host country – home country remuneration packages, cost of living allowances, etc.
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European Union competition and anti-discrimination regulations in telecoms.