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Tuning Up the Tax-Efficient Supply Chain
The marrying of business and tax objectives in a tax-efficient supply chain results in tax and operational savings. A tax-efficient supply chain is one that integrates tax considerations into the company's overall business and operational planning. Together, these strategies result in increased savings. Taxand US investigates ways in which multinationals can tune up the supply chain structure tand continue to benefit from tax efficiencies.
Tax-efficient supply chain planning typically involves centralising one or more business activities and/or functions -- such as procurement, manufacturing, R&D, intangibles, distribution, sales or services -- in a particular tax-efficient non-U.S. location.
Organisations that already have a global tax-efficient supply chain structure in place need to follow procedures to maintain it and remain compliant with various tax laws. Organisations that are expanding their global operations or those with decentralised supply chains can benefit from creating a tax-efficient supply chain structure. This involves making changes in the legal and operational structure of an organisation. Throughout, the tax department's role is to ensure that tax considerations are managed and implemented properly.
Multinational organisations can continue to benefit from the use of tax-efficient supply chain structures despite the increasing challenges presented by current and proposed rules. Harmonising business and tax needs is a core objective of many companies.
If you have an existing tax-integrated supply chain structure, it may be time to conduct a self-inspection to ensure compliance with rules. Re-examine current business activities and operations, pay attention to detail and ensure documentation is current.
If you do not have a tax-efficient supply chain structure and are considering establishing one in your organisation, then integrating procedures into your business operations is necessary to comply with a myriad of tax rules given the heightened sensitivity to shifting of income.
For both existing and new supply chains, here is a checklist of business processes, items and rules to be reviewed:
- purchase order acceptance
- order entry procedures
- location of signing of contracts
- location of management oversight, decision making and approvals
- intercompany contracts (review and/or draft)
- location of title transfer
- transfer pricing documentation
- board meetings
- location of employees
- employees signing contracts
- routing of shipments
- intercompany services
- commissionaire accounting
- cost-share calculations
- cost-sharing documentation
- Section 1059A
- customs duties
- Subpart F
- temporary cost-sharing regulations
- economic substance
- management and control
- tax rulings
- local statutory audits
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