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Summary TP - cross-border restructuring (EXAM SCHEMES)
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TP: cross-broder restructuring A cross-border business restructuring is defined as ‘the cross-border redeployment by a MNC of
functions, assets and/or risks’. Hence, a restructuring could take place in the change of the following
situations:
(i) Physical structures -> location, organisation, working conditions
(ii) Technological structures -> equipment, processes
(iii) Accounting structure -> balance of assets and resources
(iv) Organisational structure -> the division of responsibilities and tasks, information and
coordination systems
(v) Demographics -> the characteristics of employees
(vi) Phycological structure -> the prevailing mentality in the company
The primary objective of business restructurings is to:
(i) Maximise synergies and achieve economies of scale
The consequences of a business restructuring are best measure by understanding the value chain.
These could be outlined as follows:
o As with any other transactions, cross-border business restructurings must be priced in
accordance with the ALP.
Business restructuring give rise to complex TP issues because (i) such transactions do not only imply the
sale of goods/intangibles or services but also include (ii) the transfer of an activity (such as functions,
persons, assumption of risks)
Despite the fact that each business restructuring is unique and will have to be analysed on its own, it is
often the case that MNC reorganise their business activities in order to implement the centralised
entrepreneur model.
o Consequently, the three pillars of the MNC (ie (i) R&D; (ii) manufacturing; (iii) distribution) will
likely be subject to the restructuring in order to implement the centralised entrepreneur model
This would be the case where fully-fledged R&D, manufacturing or distributors are
turned into contract entities and the key activities are shifted to the central entity.
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