Services

Group Reorganization Tax Advisory Services

A number of business groups conduct reorganization in order to achieve business expansion and efficiency. Our tax professionals will give their supports with considering tax treatments to avoid unexpected tax disadvantages.

Phase1: Advice on tax analysis

• Analysis of tax consequences of the group reorganization on all parties involved
• Analysis of tax consequences of formation of a tax consolidated group

Analysis of tax issues relevant to all parties to reorganization, including group companies and their shareholders , represents a key element in assessing overall feasibility.
Changes in the group structure due to the reorganization may affect the roles, transactions or cash flows of all group companies. Hence, the tax analysis should include group companies that are not subject to the reorganization.
It should be determined whether it is beneficial to form a tax consolidated group after the reorganization. 

Phase2: Advice on structure development

• Tax structuring advice
• Assistance in obtaining an informal ruling from the tax authorities
• Company valuation for tax purposes

If certain requirements are satisfied, the group reorganization is treated as tax free. Although the requirements are less strict than in the case of non group reorganizations, various restrictions may apply, e.g. on the use of net operating losses carried forward and built-in-losses on specific assets.
If the group is filing consolidated tax return, impacts of specific rules applicable to tax consolidation should be considered.
If the tax treatment of a particular tax matter is unclear, taxpayers should consider requesting an informal ruling from the tax authorities.
The valuation of shares and goodwill for tax purposes needs to be performed in order to ensure the transactions are conducted at arm’s length. 

Phase3: Assistance with execution

• Review of agreements related to the group reorganization
• Preparation of tax returns and other relevant documents

Agreements related to the group reorganization (e.g. a merger agreement, corporate split agreement, and management services agreement) should be reviewed from a tax perspective.
Due to the special tax treatment of the group reorganizations, tax compliance after a reorganization may require assistance from professionals.
In order to transfer various tax attributes of the transferor company to the transferee company, certain application forms may need to be submitted to the tax authorities. 

Phase4: Post-reorganization advice

• Tax advice based upon a review of the group business structure
• Tax advice on the disposal of non-core businesses
• Assistance in handling tax audits

Considering the frequent amendments to the Japanese and foreign tax laws as well as the constantly changing business environment, it is important that the group business structure is regularly reviewed from a tax perspective.
When a need for a sale or liquidation of a non-core business is identified, related tax impacts should be carefully considered.
The tax treatment of the group reorganization or the tax consolidated group may be challenged in a future tax audit. In such a case, assistance from professionals, such as representation of a client in an audit or preparation of a written opinion, may be required.