Corporate reorganizations are mainly aimed at forming a group structure or reorganizing the ownership structure or operations of a business entity already operating in a group structure. The goal of the restructuring can be, for example, synergy benefits or separating the risks of different businesses. For example, in the group structure the parent company is not responsible for the obligations of its subsidiaries. It is usually advisable to distribute profits accumulated from the subsidiaries' operations to the parent company as dividends, which are tax free. In this way, profits are not exposed to the risks of the subsidiaries' operations.
A tax-wise company structure enables, for example, that a part of the business can be sold tax-free in the form of a share sale. According to the Business Tax Act, a limited liability company can sell the fixed asset shares of its business activities tax-free. By reorganizations, it is also possible to affect, e.g., the tax treatment of dividends.
IDENTIFY THE NEED FOR RESTRUCTURING IN TIME
It is characteristic of changes in the company structure and ownership structure that the business and tax benefits they enable are not recognized in the context of normal business operations. Furthermore, it is common that the need for restructuring is only noticed when there are some major changes in the business operations, such as an acquisition or a generational transfer.
It is also common that when the benefits which could be achieved through restructuring are identified it is already too late to start restructuring.
The need for corporate restructuring arises at least in connection with acquisitions, generational transfers and employee incentive planning. Corporate restructuring can also be used as an aid in tax optimization. However, we recommend planning and implementing an efficient company structure even before these needs arise.
BUSINESS TAX ACT RECOGNIZES MANY TAX NEUTRAL BUSINESS ARRANGEMENTS
When implemented correctly, restructuring does not usually result in any realized income tax liabilities. According to Finnish tax laws, demergers, mergers, asset transfers and share exchanges are all tax neutral arrangements when correctly implemented. In addition, a change in corporate form, for example from a sole trader to a limited liability company, is generally a tax neutral arrangement. Mergers, demergers, and operational changes are also exempt from transfer tax when properly implemented.
The tax neutrality of business restructuring should always be ensured by applying for an advance ruling from the Tax Administration. An advance ruling legally binds the Tax Administration, so the restructuring can be implemented without the Tax Administration being able to interfere with the restructure after the fact.
DESIGNING AN EFFICIENT BUSINESS STRUCTURE
Fiscales assists its customers from planning business structures to implementing arrangements. Creating a business structure that makes sense in terms of taxation and business usually starts with getting to know the customer's current situation and future goals. The process often continues with planning work, where we describe the different arrangement options and the benefits they can provide. The chosen restructure method requires an advance ruling from the Tax Administration, after which the arrangement can be implemented tax neutrally.