Technical Know-how in Post-Merger Integrations

01 August 2011
By Dr. Alexander Voegele and Philip de Homont et al.

This article is the seventh in a series of ten articles produced by International Tax Review on tax-effective intellectual property management. The authors present a case study in which a NERA team was retained to test and quantify the actual benefits from post-acquisition integration work. A large European multinational company (MNC) had acquired a company with local entities in the BRIC countries (Brazil, Russia, India, and China). Following the acquisition, several of the MNC managers as well as external consultants were sent to these newly acquired local entities. Among other things, they introduced better management techniques, provided technological know-how, and improved the local operations. When the company headquarters tried to charge the local entities in the BRIC countries for these services, the local tax authorities did not accept the deduction of any costs related to this implementation team. At the same time, however, the group headquarters' tax authorities insisted in charging out these costs. With the MNC in danger of double-taxation, the NERA team was tasked with finding the recipients' actual benefits and structuring a new charge system on this basis.