Transfer Pricing Restructuring and Reorganisation
01. FAR Analysis & Exit Tax Valuation
When a business moves functions, assets, or risks (FAR) from one jurisdiction to another (e.g., moving a regional sales office from Uganda to a centralized hub in Kenya), it may trigger an Exit Tax. We provide:
- Function & Risk Mapping: Documenting the before and after of the restructuring to identify what value has actually been transferred.
- Valuation of Transferred Intangibles: Using discounted cash flow (DCF) and other valuation methods to determine the arm's length compensation for the transfer of going concern value or profit potential.
- Indemnification Reviews: Assessing whether the entity losing the functions (the restructured entity) is entitled to compensation for the termination of existing contracts.
02. Implementation of Principal & Limited-Risk Models
We manage the technical conversion of business units to more streamlined structures:
- LRD & Toll Manufacturer Conversions: Assisting full-fledged distributors or manufacturers in converting to Limited Risk Distributors (LRDs) or Contract Manufacturers, ensuring their new, lower margins are defensible based on their reduced risk profile.
- Principal Structure Design: Setting up the central Entrepreneur entity that manages strategic risks, ensuring it has the necessary decision-making substance to justify retaining residual profits.
03. Post-Acquisition & Carve-out Integration
After a merger or acquisition, intercompany policies are often fragmented. TaxIQ Africa provides:
- Intercompany Policy Harmonization: Redesigning the TP policies of the acquired entity to align with the new group’s global standards.
- Carve-out TP Strategy: Defining the standalone TP framework for a business unit being sold or spun off, ensuring it is attractive to buyers and compliant with day one operational requirements.
04. Regional Procurement & Treasury Model Design
Centralizing support functions creates significant TP opportunities and risks. We offer:
- Commercial Rationale Documentation: Drafting the Business Case that proves the restructuring was driven by operational efficiency, scale, or market entry rather than just tax savings.
- Anti-Avoidance Diagnostic: Pre-emptively testing the structure against General Anti-Avoidance Rules (GAAR) and the Principal Purpose Test (PPT) to ensure it survives legal scrutiny.
05. Restructuring Defensibility & "Business Rationale" Strategy
Tax authorities (particularly the URA and KRA) often view restructuring as a tool for profit shifting. We provide:
- Procurement Hub Structuring: Designing the markup and volume rebate models for centralized buying units.
- In-House Banking & Treasury Support: Advising on the interest rates and guarantee fees for centralized cash pooling and intercompany lending within the restructured group.
06. Intangibles Migration & Licensing
IP As groups consolidate their brands or technology, we manage the IP lifecycle
. IP Migration Strategy: Advising on the tax-optimal way to move or license Intellectual Property within the group.
. Cost Sharing Agreements (CSAs): Designing and documenting agreements where multiple entities share the costs and risks of developing new intangibles, ensuring that each participant’s "buy-in" or "buy-out" payment is arm's length.
07. Global Minimum Tax (Pillar Two) Alignment
We ensure that the new reorganized structure does not trigger unintended consequences under the 15% Global Minimum Tax:
. Pillar Two Impact Modeling: Simulating how the reorganization affects the Effective Tax Rate (ETR) across the group’s African footprint.
. QDMTT Strategy: Advising on how Domestic Minimum Top-up Taxes in specific jurisdictions might impact the centralized profit model post-reorganization.