- 76% of top intra-group trading operations surveyed by EY are concerned about the extent and complexity of global tax reform 65% believe they are not involved in major decision-making process 58% of the top three risks for intra-group transactions
Global tax reforms and supply chain transformation accelerated by the COVID-19 pandemic are leading to an unprecedented level of uncertainty and risk for corporate intra-group transactions, according to a new global EU survey.
The survey, 2021 EY International Tax and Transfer Pricing Survey , examines the role and impact of tax groups / divisions of intra-group transactions – a critical tax function for businesses around the world, which oversees internal corporate transactions, including cross-border payments between subsidiaries, real estate leases and the management of intellectual property licenses.
The survey, conducted every two years, records the views of 979 intragroup executives from 53 countries and 25 industries, and highlights the increased workload created in corporate intragroup groups / departments, from recent developments.
76% of respondents say they are concerned about the extent and complexity of global tax reforms. At the same time, 71% say that these reforms will lead to an increase in the costs associated with intra-group transactions for their businesses, with 30% predicting that costs will increase by at least 10% over the next three years.
The survey also reveals that 58% of top intra-group trading operations say they do not participate as much as they should in making important business decisions, at a time when the economy seems to be emerging from a pandemic crisis. Of these, 24% state that they are involved in some, but not all, decisions, while 30% state that they are involved in them only a posteriori.
New or ongoing legislative initiatives are one of the top three risks to intra-group transactions, according to 58% of respondents, with 25% estimating them to be the biggest risk.
According to the research, fundamental changes in the dynamics of business around the world, and in particular the restructuring of supply chains and the change of the way of working, will have a substantial impact on the groups / departments of intra-group transactions. 61% of the respondents state that they will probably take measures to change their organization's approach to intra-group transactions, as well as the respective groups / departments, as well as their compliance and registration procedures, within the next two years.
Respondents cite a number of factors that will lead to these changes, including: changes in the business model of the organization (52%) and the supply chain (43%), remote work practices (46%) and pressures on environmental issues, society and governance (ESG – 36%).
As companies work more and more remotely, from different parts of the world, many of the survey participants estimate that there will be consequences from the fact that many employees will be excluded abroad, outside the jurisdiction where they normally work. 47% say they face similar challenges today, while 49% expect this to happen in the next two years. In addition, 75% say they will find it difficult to find employees with the necessary intra-group trading skills.
There is also a widespread view among respondents that more frequent and stricter checks will be the norm in the future. 65% expect an increase in the total number of controls on intra-group transactions, while 53% expect more checks on the documentation of intra-group transactions, and 48% expect stricter controls in general, many of which will focus on multilateral issues or entire chains. worth.
Issues that respondents believe are most likely to be controlled include intellectual property issues, such as location and asset ownership and risk control (reported by 38% of respondents), and the possibility of permanent establishment. (37%) and transactions with the parent company (36%) and managed services (36%).
Commenting on the findings of the research, Filippos Raptopoulos , Partner and Head of Tax and Legal Services of EY Cyprus, said : “The pandemic has significantly disrupted supply chains and affected business models, with a greater emphasis on distance work. This has created new challenges for intra-group transactions, especially in terms of permanent establishment and profit sharing, and has led to the introduction of new legislation worldwide. Intragroup executives should expect their workload to increase, and they will need to adopt new digital tools to cope. “They should also be more actively involved in key business decisions to ensure they align with the corporate strategy.”