Planning options in today’s transfer pricing environment · Page 6 Planning options in today’s...
Transcript of Planning options in today’s transfer pricing environment · Page 6 Planning options in today’s...
Planning options in today’s transfer pricing environment
TP/Supply Chain implications of US Tax
Cuts and Job Act
1 March 2018
Page 1 Planning options in today’s transfer pricing environment
Disclaimer
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► Views expressed in this presentation are those of the speakers and do not necessarily represent the
views of Ernst & Young LLP.
► This presentation is provided solely for the purpose of enhancing knowledge on tax matters. It does
not provide tax advice to any taxpayer because it does not take into account any specific taxpayer’s
facts and circumstances.
► These slides are for educational purposes only and are not intended, and should not be relied upon,
as accounting advice.
Page 2 Planning options in today’s transfer pricing environment
Agenda
► Key Tax Cut and Jobs Act (TCJA) provisions impacting
transfer pricing
► Global intangible low-taxed income (GILTI)
► Base erosion anti-abuse tax (BEAT)
► Foreign derived intangible income (FDII)
► Limitations on income shifting through intangible property (IP)
transfers
► Planning considerations:
► Planning considerations for flows
► Planning considerations for common operating models
► Conclusion
Page 3 Planning options in today’s transfer pricing environment
Presenters
Bill Macey
Principal – Transfer Pricing
Ernst & Young LLP
Direct: +1 713 750 1283
Michael Masciangelo
Partner – International Tax Services
Ernst & Young LLP
Direct: +1 713 750 5232
Page 4 Planning options in today’s transfer pricing environment
Key provisions impacting transfer pricing
Page 5 Planning options in today’s transfer pricing environment
Key provisions impacting transfer pricing
► Anti-deferral:
► Global intangible low-taxed income (GILTI)
► Anti-base erosion:
► Base erosion anti-abuse tax (BEAT)
► Export incentive:
► Foreign derived intangible income (FDII)
► Limitations on income shifting through IP transfers:
► New definition of intangible property (IP)
► Aggregation
► Codification of options realistically available
Page 6 Planning options in today’s transfer pricing environment
GILTI
► US shareholders of any controlled foreign corporation (CFC) must
include in current income their GILTI.
► GILTI is the excess of US shareholder’s net CFC tested income over
the shareholder’s net deemed tangible income return.
► Net deemed tangible income return is 10% of shareholder’s pro rata
share of qualified business asset investment (QBAI) less interest
expense:
► GILTI = Net CFC tested income – (10% * QBAI – Interest expense)
► QBAI = Book value
► Deemed-paid credit is 80% of foreign taxes paid on GILTI (however
taxed on 100% of the grossup).
Page 7 Planning options in today’s transfer pricing environment
GILTI
► GILTI implications/observations:
► Changes cost/benefit calculation of location of functions, assets
and risks:
► As a stand-alone matter, makes the US relatively more attractive:
► Note, however, important interactions with FDII deduction, GILTI deduction
and BEAT – location decisions subject to facts and circumstances
► There are several considerations that affect cost/benefit calculation,
including:
► Current location of IP and, if foreign, applicable tax rate
► Degree of alignment between IP location and the supply chain
► Implications for future movements of IP
► Note that increasing QBAI at foreign affiliates may decrease GILTI:
► Depends on actual returns to QBAI property
► GILTI inclusion will be nil if net deemed tangible income return (10%*QBAI)
less interest expense exceeds aggregate net tested income
Page 8 Planning options in today’s transfer pricing environment
BEAT
► Applicable taxpayers required to pay a tax equal to the base erosion
minimum tax amount (BEMTA), which is the excess of a percentage of the
modified taxable income of the taxpayer over the taxpayer’s regular tax
liability reduced by certain credits
► Modified taxable income is taxable income without regard to any base erosion tax
benefit with respect to any base erosion payment.
► Base erosion payments are payments paid or accrued to a foreign related party:
► Included:
► Payments for services (subject to exclusion noted below)
► Payments for royalties
► Payments for interest
► Not included:
► Payments for cost of goods sold (COGS)
► Payments for services that meet the requirements of Treas. Reg. Sec. 1.482-9(b),
without regard to the fundamental success or failure test and only to the extent of the
cost component
Page 9 Planning options in today’s transfer pricing environment
BEAT
► Implications/observations of BEAT:
► For BEAT to apply, will require significant related-party payments
to foreign affiliates
► If BEAT applies, makes payments for certain services, royalties,
interest to foreign related parties more expensive
► Applies to both US- and non-US-parented groups
► Need to look at taxpayers’ classification of, and payment for,
services:
► Eligible for services cost method (SCM) or not?
► Separate invoices for services charged at cost and those with a
markup:
► Especially when third-party (pass-through) costs are included
Page 10 Planning options in today’s transfer pricing environment
BEAT
► For services with a markup, it is unclear whether cost plus the
markup, or just the markup, is covered by BEAT.
► Third-party (pass-through) costs are covered as BEAT eligible if not
under the SCM.
► The 3% threshold is a cliff:
► Incremental cost of going over 3% threshold is very high.
► Or, alternatively, the incremental benefit from going under 3% is also very
high.
► BEAT calculation of taxable income includes GILTI and FDII inclusion.
► How to handle implied royalties embedded in COGS (US tax
accounting rules (263A), customs implications, etc.)?
► Benefit to embedding services in COGS.
Page 11 Planning options in today’s transfer pricing environment
FDII
► FDII of a US corporation is its deemed intangible income multiplied by
the ratio of its deduction eligible income that is foreign derived:
► Deduction eligible income is gross income less exceptions and allocable
deductions.
► FDII provides incentive for US companies to export property and services.
► Deemed intangible income is deduction eligible income less 10% of QBAI.
► Foreign derived deduction eligible income is deduction eligible income
that is derived in connection with either:
► Property sold to non-US persons for a foreign use:
► If sold to a non-US related party, the property must be on-sold to a non-US third party
for foreign use.
► Services provided to non-US persons:
► If provided to a non-US related party, the service must not be substantially similar to
services provided by the related party to persons in the US.
Page 12 Planning options in today’s transfer pricing environment
FDII
► Deductions allow reduction in US rate:
► For tax years beginning after December 31, 2017 and before January 1,
2026, deduction is 37.5%, leading to an effective tax rate on FDII of
13.125%.
► For tax years beginning on January 1, 2026 and thereafter, deduction is
21.875%, leading to an effective tax rate on FDII of 16.406%.
Page 13 Planning options in today’s transfer pricing environment
FDII
► Implications/observations of FDII:
► As a stand-alone matter, provides incentives for certain export
transactions:
► Note, however, important interactions with FDII deduction, GILTI deduction and
BEAT – location decisions subject to facts and circumstances
► There are several considerations that affect cost/benefit calculation, including:
► Current location of IP and, if foreign, applicable tax rate
► Degree of alignment between IP location and the supply chain
► Implications for future movements of IP
Page 14 Planning options in today’s transfer pricing environment
Limitations on income shifting through IP transfers
► Definition of IP:
► Workforce in place, goodwill and going concern are IP within the meaning
of Section 936(h)(3)(B).
► Use aggregate basis method when it achieves a more reliable result
than an asset-by-asset method
► Codifies use of options realistically available principles
Page 15 Planning options in today’s transfer pricing environment
Limitations on income shifting through IP transfers
► Implications/observations:
► The proposal effectively codifies valuation principles espoused by the Treasury and
IRS:
► Do not use labels such as “workforce” or “goodwill” to inappropriately justify transfers of
value without compensation
► “Realistic alternatives” as a valuation principle rather than a recharacterization principle
► PCT (platform contribution transaction) payments (broader “resources and capabilities”
definition) now more clearly subject to CWI (commensurate with income)
► It should not be the case that all aspects of the accounting value of goodwill,
workforce, etc. are necessarily compensable:
► Instead, the determination of appropriate compensation will not simply turn on the
classification of the contribution.
► Depending on the nature of the IP covered in the intercompany transaction,
comparable uncontrolled transactions (CUTs) may be less reliable.
► Income method, properly implemented, is still a potentially appropriate method.
Page 16 Planning options in today’s transfer pricing environment
Key planning considerations
Page 17 Planning options in today’s transfer pricing environment
Planning considerations for flows
► Overall
► Tangible property
► Intangible property
► Services
Page 18 Planning options in today’s transfer pricing environment
Overall
► Focus on US transfer pricing likely to increase:
► From IRS due to expanded definition of IP, as well as move to semi-
territorial system
► From foreign tax authorities/governments as they respond to US changes,
as well as actions that US companies take to modify their supply chains
► Need to evaluate impact on existing advance pricing agreements
(APAs), if any, for example:
► Implementation of existing APA term tests and prospective availability of
term tests that include pre-2018 years in results
► Potential trigger of standard APA critical assumption caused by change in
treatment of previously deducted expenses as COGS for purposes of
BEAT
Page 19 Planning options in today’s transfer pricing environment
Tangible property
► Due to BEAT, would be beneficial to evaluate embedding payments
for IP and/or services in COGS:
► Alternatively, need to understand the risk associated with current flows
that have embedded IP and/or services payments
► Evaluate placing asset-intensive low-value routine activities offshore:
► May lower calculated value of GILTI
Page 20 Planning options in today’s transfer pricing environment
Intangible property
► Need to evaluate the costs/benefits of current IP strategy
► Key factors in IP decision-making include:
► Location of current IP (US, foreign onshore, foreign offshore):
► Foreign and US tax rates
► Connectedness to business/supply chain/customers
► Substance
► GILTI, FDII, BEAT
► Costs of IP migration/unwind
► New vs. existing IP
► Timing of IP migration possibly impacted by GILTI and BEAT
inclusions
Page 21 Planning options in today’s transfer pricing environment
Services
► It is important for companies to understand which of the
services that they pay related parties to meet the
requirements of the SCM (without regard to the
fundamental success or failure test).
► Changing a service transaction to a tangible goods
transaction may help to minimize BEAT:
► Toll manufacturing vs. contract manufacturing
► Procurement services vs. buy-sell
► Commission sales vs. buy-sell distribution
Page 22 Planning options in today’s transfer pricing environment
Planning considerations for typical operating models
► Overall
► US IP company
► Foreign IP company
► Domestic exporter
► Foreign principal
► Foreign procurement company (buy-sell)
► Foreign procurement company (service fee)
► Foreign (inbound) supply chain management company
(SCMCo)
Page 23 Planning options in today’s transfer pricing environment
Reshaping of operating models
Impact category How might the Tax Cuts and Jobs Act reshape supply chains?
Capital/financing ► Change acquisition and investment decisions (e.g., immediate “expensing” of new investments in depreciable assets)
► Change global capital structure — impact on interest deductibility and limitations on net interest expense re: US debt
coupled with cash from repatriated profits in the US
IP ownership ► Incentivize Research & Development (“R&D”)/IP activities in the US
► Possibly discourage expatriation of IP (valuation method and expanded definition of intangibles)
► Encourage driving up the tangible asset base in the CFCs to mitigate impacts of GILTI but driving down for FDII to
optimize income subject to 13.125%
► Use aggregate basis method when it achieves a more reliable result than an asset-by-asset method
Foreign operations ► Possibly encourage expansion/relocation of assets, functions and risk to the US:
► Review Earnings & Profit (“E&P”) and tax profiles of foreign subsidiaries for potential targets
► Evaluate local country exit risk/loss of credits and incentives (business and tax)
► Consider rate arbitrage with foreign hubs taxed at less than 21% to balance US and foreign operational footprint
► Impact decisions in global supply chain strategy (e.g., suppliers and production)
Transactional model ► Change transactional models between the sale of products/services
► Discourage “round tripping” activities with foreign entities (i.e., the process whereby a product/tangible good with partial
origin in the US is sent out of the US and then brought back in as an import)
IRS and global
controversy landscape
► Increased compliance risk and accounting requirements
► Transfer pricing controversy as supply chains re-base in the US
► Result in more aggressive posture from foreign tax authorities
► Result in possible challenges by trading partners to certain provisions (e.g., BEAT)
Effective dates ► Companies need to nimbly respond to immediate implementation of provisions.
► Companies need to take into account implementation and sunset dates for certain provisions when planning going
forward.
Page 24 Planning options in today’s transfer pricing environment
Common operating modelsImpact of anti-deferral/base erosion provisions
Model type BEAT GILTI FDII
1) US IPCo ✓ ✓
2) Foreign IPCo ✓ ✓
3) Domestic exporter ✓ ✓
4) Foreign principal
operating company✓ ✓
5) Foreign procurement
company (buy-sell)✓
6) Foreign procurement
company (services fee)✓ ✓
7) Foreign (inbound)
supply chain
management company
✓
Indicates model likely
impacted by provision✓
Key
Page 25 Planning options in today’s transfer pricing environment
1) US IPCoOverview
Foreign
OPCos
US
ROW
Overview:
► US parented group.
► US IPCo owns IP and licenses it to foreign OPCos
(CFCs) for their use in making products or licensing
outside the US.
► Foreign OPCos pay US IPCo a royalty for their use of the
IP.
TCJA:
► BEAT does not apply (no payment to foreign related
party).
► US IPCo taxed on 50% of GILTI (grossed-up under
Section 78) earned by CFCs, i.e., income in excess of
10% return on tangible assets.
► Residual US tax rate on GILTI is between 0% and
10.5%, depending on foreign tax rate.
► USCo royalty income will be FDII effectively subject to
tax at 13.125% (vs. 21%).
Modeling assumptions (see next slide):
► US IPCo:
► Has taxable income (pre-GILTI) of $400m
► Receives $300m of its income from royalties and
$100m from US domestic sales
► Has tangible asset base of $100m
► Foreign OPCos:
► Have aggregate taxable income of $100m
► Pay aggregate taxes of $25m
► Have tangible asset base of $50m
US IPCo
Legend
Royalty payment
Related parties
Page 26 Planning options in today’s transfer pricing environment
1) US IPCoPlanning rules of thumb
► Undertake IP scrub of intangible assets in order to determine location
of ownership of IP for tax purposes and planning guiding principles
► Continue to develop IP in the US and license outside to foreign
distributors and manufacturers for use outside the US — income
earned from licensing of US IP to foreign third parties or affiliates
effectively taxed at 13.125% vs. 21% with the FDII
► Anticipate foreign taxing jurisdictions’ reaction to FDII provision that
might subject the FDII to foreign tax
Page 27 Planning options in today’s transfer pricing environment
2) Foreign IPCoOverview
US
OPCo
US
ROW
Structure:
► US parented group.
► Foreign IPCo (CFC) owns global IP and licenses US
rights to US OPCo.
► US OPCo pays a royalty to foreign IPCo.
► All US OPCo sales are to US third-party customers.
TCJA:
► US OPCo royalty payment potentially subject to BEAT,
i.e., excess of 10% (5% in 2018) of modified taxable
income (add back payment) over tax liability on regular
income.
► US OPCo taxed on 50% of GILTI (grossed-up under
Section 78) earned by CFCs, i.e., income in excess of
10% return on tangible assets.
► Residual US tax rate on GILTI income is between 0%
and 10.5%, depending on foreign tax rate.
Modeling assumptions (see next slide):
► US OPCo:
► Has US taxable income (pre-GILTI) of $100m
► Pays $500m royalty to foreign IPCo
► Foreign IPCo:
► Has pretax income of $265m
► Pays foreign tax of $15m
► Has negligible income from other sources
Foreign
IPCo
Legend
Royalty payment
Related parties
Page 28 Planning options in today’s transfer pricing environment
2) Foreign IPCo Planning rules of thumb
► Profits attributable to non-tangible assets earned in CFCs will be
subject to minimum tax of 13.125%, meaning that low-tax IPCos will
be most impacted.
► Drive up tangible assets base to mitigate impacts from GILTI.
► Hybrid entities with IP and royalty income should be reviewed for
impact of anti-hybrid provisions.
Page 29 Planning options in today’s transfer pricing environment
3) Domestic exporterOverview
Legend
Payment for RM/finished goods
Related parties
USCo
SalesCos
Customers
US
ROW
Suppliers
Overview:
► US parented group.
► USCo primarily purchases RM, manufactures and sells
FG to US customers or to ROW SalesCos (CFCs) that
sell to ROW customers.
► All IP is owned in the US.
TCJA:
► BEAT does not apply (no payment to foreign related
party).
► USCo taxed on 50% of GILTI (grossed-up under Section
78) earned by CFCs, i.e., income in excess of 10%
return on tangible assets (aggregate).
► Residual US tax rate on GILTI is between 0% and
10.5%, depending on foreign tax rate.
► USCo income from sales of FG to SalesCos will be FDII
effectively subject to tax at 13.125% (vs. 21%).
Modeling assumptions (see next slide):
► USCo:
► Has taxable income of $800m derived 50/50 from
sales to US customers/related SalesCos
► Has tangible assets of $800m
► SalesCos:
► Have tangible asset base of $0m
► Have taxable income of $40m
► Pay foreign tax of $10m
Customers
Page 30 Planning options in today’s transfer pricing environment
3) Domestic exporterPlanning rules of thumb
► Optimize FDII so that income is taxed at 13.125% vs. 21%:
► Expand domestic production for sale outside the US
► Expand services provided outside the US
► Continue to develop IP in the US and license outside to foreign distributors and
manufacturers for use outside the US
► GILTI/FDII:
► Drive up low-return tangible asset base in CFCs to mitigate potential GILTI
inclusion
► Integrate tax strategy with supply chain strategy:
► Foreign hubs remain tax effective where tax rates are equal to or less than US rate. If foreign
tax rate on GILTI is above 13.125%, there is no residual US tax.
► Consider potential conflicts with indirect tax planning
► Evaluate state tax impact of GILTI/BEAT on determining of federal taxable
income
Page 31 Planning options in today’s transfer pricing environment
4) Foreign principal operating companyOverview
Overview:
► US parented group.
► USCo purchases RM, manufactures and sells FG to US
customers or to Principal (CFC) to sell to ROW
customers. USCo also purchases FG from Principal for
sale in the US.
► Principal owns ROW IP, purchases RM, uses related toll
or contract manufacturers (CFCs) to produce finished
goods, and sells to distributors (CFCs) for sale to ROW
customers.
TCJA:
► BEAT does not apply to COGS.
► USCo taxed on 50% of GILTI (grossed-up under Section
78) earned by CFCs, i.e., income in excess of 10%
return on tangible assets (aggregate).
► Residual US tax rate on GILTI is between 0% and
10.5%, depending on foreign tax rate.
► USCo income from sales of FG to Principal will be FDII
effectively subject to tax at 13.125% (vs. 21%).
Modeling assumptions (see next slide):
► USCo:
► Has revenue of $1,000m
► SELLS $500m to Principal for sale to foreign third
party customers
► Has taxable income of $300m (50/50 from sales to
US customers/Principal)
► Has tangible assets of $800m
► Principal has taxable income of $100m.
► Distributors and Manufacturers have taxable income of
$50m.
► Total foreign tax is $15m.
► CFCs have tangible asset base of $800m.
Legend
Payment for RM/finished goods
Payment for services
Related parties
Customers
Customers Manuf.
Dist. Principal
USCo
Suppliers
US
ROW
Page 32 Planning options in today’s transfer pricing environment
4) Foreign principal operating company Planning rules of thumb
► BEAT:
► Minimize payments for outbound services and royalties
► Evaluate whether payments for services or IP can be included in COGS
► Evaluate services payments to determine whether they can be bifurcated into (1) those that qualify for SCM and
(2) those that do not
► Keep base erosion percentage under 3%
► GILTI/FDII:
► Drive up low-return tangible asset base in CFCs to mitigate potential GILTI inclusion
► Consider re-basing assets and functions in the US to optimize exports/FDII and mitigate impact of GILTI:
► Evaluate foreign conversion implications
► Integrate tax strategy with supply chain strategy:
► Foreign hubs remain tax effective where tax rates are equal to or less than US rate. If foreign tax rate on GILTI
is above 13.125%, there is no residual US tax.
► Consider the impact of expanded definition of intangibles and proposed valuation methods if
expatriating IP
► Consider potential conflicts with indirect tax planning
► Evaluate state tax impact of GILTI/BEAT on determining federal taxable income
Page 33 Planning options in today’s transfer pricing environment
5) Foreign procurement company (buy-sell)Overview
Legend
Payment for RM/finished goods
Related parties
USCo
ProcureCo
Customers
US
ROW
Suppliers
Overview:
► US parented group.
► Foreign ProcureCo purchases FGs and/or RM from
foreign suppliers and sells to USCo.
► USCo makes and/or sells finished goods to US
customers.
TCJA:
► BEAT does not apply to COGS.
► USCo taxed on 50% of GILTI (grossed-up under Section
78) earned by ProcureCo, i.e., income in excess of 10%
return on tangible assets (aggregate).
► Residual US tax rate on GILTI is between 0% and
10.5%, depending on foreign tax rate.
Modeling assumptions (see next slide):
► USCo:
► Has taxable income of $400m
► Purchases $800m of product from ProcureCo
► Has tangible assets of $100m
► ProcureCo:
► Has taxable income of $200m
► Pays $10m of tax
► Has no tangible assets
Page 34 Planning options in today’s transfer pricing environment
5) Foreign procurement company (services fee)Overview
USCo
ProcureCo
Customers
US
ROW
Suppliers
Overview:
► US parented group.
► USCo purchases RM/FG from foreign unrelated suppliers
and pays a service fee or commission to ProcureCo.
► USCo makes/sells FG to US customers.
TCJA:
► USCo services payment potentially subject to BEAT,
i.e., excess of 10% (5% in 2018) of modified taxable
income (add back payment) over tax liability on regular
income.
► USCo taxed on 50% of GILTI (grossed-up under Section
78) earned by ProcureCo, i.e., income in excess of 10%
return on tangible assets.
► Residual US tax rate on GILTI is between 0% and
10.5%, depending on foreign tax rate.
Modeling assumptions (see next slide):
► USCo:
► Has taxable income of $400m
► Pays ProcureCo a service fee of $200m
► Has tangible assets of $100m
► ProcureCo:
► Has taxable income of $200m
► Pays $10m of tax
► Has no tangible assets
Legend
Services payment
Payment for RM/finished goods
Related parties
Page 35 Planning options in today’s transfer pricing environment
5) and 6) Foreign procurement company (buy-sell and services fee) Planning rules of thumb
► BEAT:
► Maximize buy-sell vs. services as COGS not included
► Keep base erosion percentage on service payments below 3%
► Evaluate embedding payments for IP and/or services in COGS
► Evaluate services payments to determine whether they can be bifurcated into (1) those that
qualify for SCM and (2) those that do not
► GILTI:
► Drive up tangible asset base (that generates tested income) in CFCs to mitigate potential GILTI
inclusion
► Consider potential conflicts with indirect tax planning if breaking out royalties/services
as a component of COGS, e.g., exclusive distribution right (EDR) planning
► Evaluate state tax impact of GILTI/BEAT on determination of federal taxable income
► Consider sourcing from domestic suppliers vs. foreign suppliers or from a US affiliate of
a foreign supplier
► Purchase from foreign third party versus foreign related party
Page 36 Planning options in today’s transfer pricing environment
7) Inbound supply chain management companyOverview
SalesCo
SCMCo
Customers
US
ROWSuppliers
Overview:
► Foreign parented group.
► SCMCo purchases RM, uses a related US toll
manufacturer and sells FG to US SalesCo to sell to US
customers.
► IP is owned outside the US.
► There are no CFCs in the group structure.
TCJA:
► No impact from BEAT – COGS excluded
► No GILTI as USCos have no CFCs
Modeling assumptions (see next slide):
► SCMCo:
► Has taxable income of $400m
► Pays US manufacturer $200m for toll manufacturing
services
► Pays foreign tax of $20m
► US Manufacturer:
► Has taxable income of $10m
► Has tangible asset base of $500m
► US SalesCo:
► Has taxable income of $40m
► Pays SCMCo $300m for FG
► Has no tangible asset base
Manuf.
Legend
Payment for RM/finished goods
Payment for services
Related parties
Page 37 Planning options in today’s transfer pricing environment
7) Inbound supply chain management company Planning rules of thumb
► BEAT:
► Maximize buy-sell vs. services as COGS not included
► Keep base erosion percentage on service payments below 3%
► Evaluate services payments to determine whether they can be bifurcated into
(1) those that qualify for SCM and (2) those that do not
► Evaluate embedding payments for IP and/or services in COGS
► Evaluate expanded definition of intangibles and valuation methods before
outbounding any US IP
► Consider potential conflicts with indirect tax planning, as well as potential
opportunities to save customs duties through the use of first sale planning
► Evaluate state tax impact of BEAT on determining of federal taxable income
Page 38 Planning options in today’s transfer pricing environment
Conclusion
Page 39 Planning options in today’s transfer pricing environment
Conclusion
► Almost every supply chain and associated transfer pricing
methods are impacted by the TCJA (some positively and
some negatively)
► Along with global OECD/BEPS/MLI/ATAD2 pressures
offshore, approach to activity centralization and profit
aggregation may change
► Long term modeling is essential to make the best short
term and long term decisions
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