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The Resource Acquisition financing

Acquisition financing

Summary
QUESTIONS: Assume that a foreign country investor (a parent of a multinational group (FCo)) wishes to acquire an operating company in your country (the Host Country and HC Target, respectively). The plan is for HC Acq to acquire the shares of HC Target. One common structure to do this is to incorporate an HC acquisition vehicle (HC Acq). FCo would then contribute some equity and would grant HC Acq additional shareholder loans to finance the acquisition. HC Acq might, either alternatively or also, borrow funds from third-party HC banks. 1. What limitations, if any, are imposed on the deductibility of the interest and other financing expenses incurred by HC Acq with respect to: a. the shareholder loans from FCo, and b. the funds borrowed from third-party banks? Subsequent to the acquisition, it is intended to merge HC Acq with HC Target, allowing the operating cash flow of HC Target to be used to fund the interest payments on the financing received by HC Acq. 2. Are additional limitations imposed on the deductibility of the interest expenses incurred by the merged company, and if so, what are they? 3. If there are such limitations, might they be restrictive enough to compromise the viability of the transaction? Would there be alternative structures or financing arrangements that might be put into place that would mitigate or eliminate the impact of those limitations? 4. If not already in place, is HC intending to introduce restrictions on the deductibility of interest based on BEPS Action 4 and/or the EU Anti-Tax Avoidance Directive that would substantially change the position discussed under 1.-3., above?
Language
eng
Work
Instance
Label
Acquisition financing
Title
Acquisition financing
Subject
Language
eng
Summary
QUESTIONS: Assume that a foreign country investor (a parent of a multinational group (FCo)) wishes to acquire an operating company in your country (the Host Country and HC Target, respectively). The plan is for HC Acq to acquire the shares of HC Target. One common structure to do this is to incorporate an HC acquisition vehicle (HC Acq). FCo would then contribute some equity and would grant HC Acq additional shareholder loans to finance the acquisition. HC Acq might, either alternatively or also, borrow funds from third-party HC banks. 1. What limitations, if any, are imposed on the deductibility of the interest and other financing expenses incurred by HC Acq with respect to: a. the shareholder loans from FCo, and b. the funds borrowed from third-party banks? Subsequent to the acquisition, it is intended to merge HC Acq with HC Target, allowing the operating cash flow of HC Target to be used to fund the interest payments on the financing received by HC Acq. 2. Are additional limitations imposed on the deductibility of the interest expenses incurred by the merged company, and if so, what are they? 3. If there are such limitations, might they be restrictive enough to compromise the viability of the transaction? Would there be alternative structures or financing arrangements that might be put into place that would mitigate or eliminate the impact of those limitations? 4. If not already in place, is HC intending to introduce restrictions on the deductibility of interest based on BEPS Action 4 and/or the EU Anti-Tax Avoidance Directive that would substantially change the position discussed under 1.-3., above?
Citation source
In: Tax management international forum. - London. - Vol. 39 (2018), no. 1 (March) ; 83 p
Geographic coverage
International
Language note
English
http://library.link/vocab/subjectName
  • acquisition
  • financing
  • banking
  • cash flow
  • interest deduction
  • merger
  • BEPS Project (OECD)
  • ATAD
Label
Acquisition financing
Publication

Subject

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      52.3736660 4.9336932

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