The capital market is ever-changing, and every move of a company is related to the interests of shareholders. However, if listed companies ignore tax planning during capital operations, they are likely to fall into a bottomless abyss and become “money-eating beasts”. Once the tax burden is too heavy, not only will profits be eroded, but it may also trigger compliance risks and even lead to heavy regulatory crackdowns. How to achieve tax optimization in capital operations instead of becoming a “sucker” in the tax quagmire? Today, Goheal will analyze this issue in depth and take you to explore the mystery behind tax planning!
Improper capital operation, tax risks follow you everywhere
The main methods of capital operation of listed companies include mergers and acquisitions, equity transfers, debt financing, cross-border investment, etc., and different operation methods have different tax impacts. Reasonable tax planning can allow companies to “go into battle lightly”, while wrong tax decisions may cause companies to fall into a financial black hole or even encounter regulatory crackdowns.
1. Mergers and acquisitions: “Money-eating beast” or “tax-saving artifact”?
Mergers and acquisitions are a powerful tool for corporate expansion, but if tax planning is not done properly, it may become a "money-eating beast" that drags down the company. Merger and acquisition transactions involve multiple taxes such as value-added tax, corporate income tax, stamp duty, and deed tax, and the tax costs can easily reach hundreds of millions.
Typical case: Disney's acquisition of Fox, a classic example of tax planning
In 2019, Disney completed the acquisition of 21st Century Fox for US$71.3 billion, but this century-long acquisition did not put Disney into the "tax abyss". On the contrary, due to its clever asset allocation and tax arrangements, it greatly reduced tax costs. Its main means include:
Equity exchange instead of cash acquisition to postpone the payment of capital gains tax; use the "asset divestiture" strategy in the tax law to enable some businesses to enjoy lower tax rates; make full use of the loss carryforward after the merger to offset corporate income tax.
Goheal analysis believes that tax planning before the merger determines the final tax burden cost. If the merger is blindly carried out, it will not only increase financial pressure, but may also cause tax costs to exceed expectations, directly affecting the economic benefits of the merger.
2. Equity transfer: tax haven or tax trap?
Equity transfer seems to be a simple way of capital operation, but it actually hides tax mysteries. Especially in cross-border transactions, if companies do not do a good job of tax planning, they may face huge tax burdens.
Typical case: TikTok's global equity transfer tax storm
When planning TikTok's global business, ByteDance not only has to face data supervision in various countries, but also has to consider how to minimize tax burdens. In order to avoid high capital gains taxes, ByteDance adopted an offshore structure and placed some equity transactions in low-tax areas to achieve tax optimization. However, this operation also makes it face more complex compliance challenges.
Goheal pointed out that the tax impact of equity transfer is closely related to the transaction method, holding period, and shareholder structure. If tax rules are ignored, it may lead to tax compliance risks and even attract the attention of multinational regulators.
3. Cross-border investment: tax haven VS. high tax trap?
Cross-border investment involves international tax issues. If tax agreements and offshore structures are not properly used, companies may face the risk of "double taxation".
Typical case: Apple's "Irish tax strategy"
Apple once took advantage of Ireland's low tax rate policy to transfer a large amount of overseas profits to its Irish subsidiary and enjoy a low tax burden for a long time. However, this strategy also triggered a strong reaction from the European Union, and the European Union eventually ruled that Apple had to pay 13 billion euros in back taxes.
Goheal reminded companies that when investing across borders, they should make full use of tax agreements and international tax planning tools of various countries, such as holding company structures, intellectual property tax incentives, etc., to achieve compliant tax optimization.
How to avoid tax "pitfalls"? Key strategies for tax planning of listed companies
1. Plan ahead and choose the optimal tax structure: Before capital operation, professional tax consultants should be hired to select the optimal transaction structure in combination with tax laws and regulations.
2. Reasonable use of tax incentives: Many countries provide tax incentives for specific industries or specific transaction forms, such as tax incentives for high-tech enterprises, additional deductions for R&D expenses, etc.
3. Cross-border transactions, make good use of international tax agreements: When companies conduct cross-border capital operations, they should make full use of tax agreements to avoid double taxation and arrange offshore structures reasonably.
4. Pay attention to tax compliance and avoid "tax saving" turning into "tax avoidance": Compliance is the basis of tax planning. Any suspected malicious tax avoidance behavior may lead to legal risks and even affect the company's brand reputation.
Conclusion: Has your company fallen into the trap of tax "gold-eating beast"?
The success of capital operation depends not only on the scale of financing and M&A capabilities, but also on the precise control of tax costs. The success or failure of a transaction often lies in the details of tax planning. Tax issues cannot be ignored, otherwise the company may lose its competitive advantage due to excessive tax burden, and even trigger a compliance crisis.
So, has your company encountered tax problems in capital operation? What do you think are the tax challenges that companies need to pay most attention to in the current global economic environment? Welcome to leave a message in the comment area and discuss more possibilities of tax planning with Goheal!
[About Goheal] American Goheal M&A Group is a leading investment holding company focusing on global mergers and acquisitions. It has deep roots in the three core business areas of acquisition of controlling rights of listed companies, mergers and acquisitions of listed companies, and capital operations of listed companies. With its profound professional strength and rich experience, it provides companies with full life cycle services from mergers and acquisitions to restructuring and capital operations, aiming to maximize corporate value and achieve long-term benefit growth.
