A restructuring may support new investment, separate business lines or prepare a sale. Tax analysis starts with those objectives and the proposed means of achieving them. A legal entity reorganisation, an asset sale and a contractual transfer of functions are different actions; their consequences cannot be calculated using a single template.
Three questions before restructuring
Why is the structure changing?
Describe the commercial outcome: separate project financing, risk management or a change in ownership. Record why the chosen approach meets the business’s needs.
What moves, and on what terms?
List the assets, contracts, employees and obligations involved. Identify the parties, price or valuation method, payment arrangements and the date functions will transfer.
How will the companies operate afterwards?
Review each company’s resources, authority and cash flows. Documents should reflect the actual arrangements for sales, procurement and decision-making.
The Federal Tax Service explains the importance of commercial purpose in business restructuring. Formally establishing new companies is therefore no substitute for reviewing their actual activities.
Building the tax model
Lawyers and accountants should compare options using the same assumptions. Include applicable taxes, the treatment of earlier expenses and deductions, the transfer of obligations and implementation costs. Review related-party transactions separately. A useful table links each action to its tax issue, supporting document and responsible person.
Next, test the model against the facts. If a business line is to operate independently, it needs clear contracts, resources and authority. A mismatch between documents and operations does not disappear when corporate changes are registered.
Preparing for an initial discussion
Bring group charts before and after the proposed changes, the objectives, a list of assets and liabilities to be transferred, key contracts and details of the tax regimes involved. These materials help identify contentious transactions and the calculations and explanations needed before signing.
For audit support and appeals, see our tax disputes practice.
Review the tax model before transferring assets. Commercial purpose, calculations and the companies’ actual operations should form one consistent explanation.