Tax offerings for the life sciences industry
The life sciences industry faces one of the toughest periods in recent history. Pharmaceutical, biotech, and medical equipment companies not only are emerging from a period of extreme economic turmoil, but they are also adjusting to fundamental and transformative changes in the markets they serve. In fact, in our work with leading life sciences companies, our clients consistently describe a number of issues that impact their businesses today. Among the most notable are: sustaining growth with a pipeline of profitable products; preparing for potential reform of U.S. international tax laws; planning for migration to International Financial; And, Accounting Standards.
Tax operations services
Deloitte can bring a fresh perspective by providing assistance to you in streamlining your tax operations. With the goal of achieving a higher-performing tax function, we help you enhance your efficient use of data and information, technology and systems, processes and policies, and people and the organization. Data is the foundation for tax and finance decisions, while systems and technology capture, store, and maintain the integrity of data. Solid processes and policies enable the consistent use of those systems and technologies. The people within the tax function, the tools and resources provided to them, and how they are deployed figure significantly into the tax function’s ability to add value to the organization. Using this framework, we can help you critically analyze the tax planning and compliance decisions you face.
Mergers and Acquisitions (M&A) Tax Services for Life Sciences
Many life sciences companies are actively seeking acquisitions of smaller companies that may have some technology that fits their pipeline. Others are considering the opportunity to seek larger transactions which may help leverage resources, eliminate excessive costs and duplication, address pipeline concerns, and enhance growth platforms. The tax implications of these deals can be significant. Deloitte is positioned to provide assistance at each step of the M&A lifecycle. We support tax due diligence to identify historical tax exposures of which buyers should be aware, and explore opportunities for beneficial use of the target company’s tax attributes. During transaction planning and execution, we offer knowledgeable insights for structuring the deal for tax-alignment with your specific M&A objectives, along with your broader enterprise strategies, through deductibility of acquisition costs, preserving specific tax attributes, evaluating a taxable or tax-free structure, and other considerations. To prepare you for post-acquisition integration, Deloitte’s tax integration practice can help you develop and implement an integration strategy designed to address critical day 1 matters, strive for efficiency in the combined company’s tax department and compliance function, eliminate redundancies in your legal entity structure, and execute on identified tax planning opportunities. Similar to the above buy-side services, Deloitte’s M&A professionals offer many of the same services when assisting you in selling your company or a subsidiary/division.
Tax implications for revenue recognition
Collaboration and development agreements represent other avenues for growth that many life sciences companies are exploring. The tax implications of these arrangements are significant because the kinds of payments that are involved affect both the recipient and the payee. We can assist you in assessing various structures and types of payments, particularly on the revenue recognition side, and assist you in finding ways to arrive at a tax-efficient answer. We have seen from our experience that a working relationship between tax departments and the business development function can produce added value to the enterprise.
Medical device excise tax solutions
Medical device companies have been reporting and paying the medical device excise tax (MDET) since its January 1, 2013 effective date. Many of these companies find that the MDET negatively impacts their bottom line. However, there are viable strategies to help mitigate the MDET and is impact on your bottom line. Deloitte can assist in evaluating strategies and opportunities to potentially mitigate your company's MDET liability. In particular, we can provide assistance in determining whether a more advantageous taxable sales price can be used to calculate your MDET liability, and whether you have taken advantage of all exemptions and exclusions from the tax. Additionally, with the IRS aggressively auditing medical device companies, Deloitte's team of experienced excise tax professionals is uniquely positioned to assist with MDET audit defense and compliance obligations.
International tax services
The current administration’s agenda has included the reform of international taxes to close perceived loopholes in return for a potential reduction in tax rates. Given the global nature of the life sciences sector, these businesses could be significantly impacted by proposed changes in tax rules. In many life sciences companies, for example, intellectual property resides outside of the United States. Current deferral opportunities are likely to be impacted if certain proposed changes are enacted. Understanding potential outcomes is essential to staying ahead of this situation. Deloitte can help you:
- understand the sources of the numbers;
- identify and gather data, quickly performing the calculations so you have the numbers when you want them;
- assist you with the standardization and fine-tuning of the databases, worksheets, templates, and models that produce the numbers, to provide increased efficiencies for specific calculations; and,
- educate and train your internal personnel to maintain new processes that result from your decision making.
The life sciences industry has long been at the forefront of transfer pricing, a leadership position that has come at a price. Tax authorities routinely target life sciences companies with transfer pricing audits, and novel interpretations of and changes to tax statutes and regulations sometimes affect life sciences companies disproportionately. In fact, recent changes in tax regulations and more-rigorous regulatory interpretations can be viewed as testing the fundamental arm’s length principles of U.S. income tax treaties.
Deloitte takes an integrated approach to your transfer pricing needs, with specialists in local country requirements, international tax issues, customs, and research and development incentives. We recognize that transfer pricing does not exist in isolation and that sound practice takes into account related tax issues and your business strategy.
Multistate Tax Services
States are increasingly taking more aggressive action around taxation. This is due in large measure by budget shortfalls which are driving States to look for ways to increase revenue and generate new revenue streams. A number of States have taken action in one or more of the following areas: Increases in state tax rates; Changing from stand-alone filing to a combined or unitary filing approach; And, Changes in apportionment rules. Deloitte’s Multistate tax professionals can assist in helping you understand the impact of these changes on the effective state tax rate on your company, and by analyzing your state tax structure to look for ways to reduce your state taxes.