7.14.2014

Corporate Inversions explained



Inversions, takeovers that allow U.S. companies to lower their tax rates through a move overseas, are on the rise. Here’s what you need to know about them.

List of 5 (summary):


  1. What are they? Inversions enable a U.S. company to lower its tax rate. In these deals, a U.S. company buys a foreign target and adopts its home country’s domicile, or the combined company establishes a holding company in a country with a low tax rate
  2. How do they workShareholders of the acquired foreign company must receive stock amounting to at least 20% of the resulting entity
  3. Who's doing them? Inversions have been popular among pharmaceutical and life-sciences companies, which have overseas cash they don’t want subject to U.S. tax rates
  4. What's driving the increase? Inversions have been popular among pharmaceutical and life-sciences companies, which have overseas cash they don’t want subject to U.S. tax rates
  5. What are the pitfalls? U.S. policymakers have criticized companies that strike these deals to lower their taxes
Comment: The latest: Abbvie: Two articles: 1, 2. Like 'em or Love 'em ... it's because the US Corporate Tax rate is too high. Water flows downhill ... tax policy forces companies to make decisions like this (as an aside ... this is why my brother-in-law is changing his domicile from Minnesota to Florida ... to save on taxes)

1 comment:

  1. Is Walgreens next?

    Walgreen is currently thinking about leaving American shores, as part a plan to buy the rest of the U.K. drugstore chain Alliance Boots GmbH, which is headquartered in Switzerland. The move could help Walgreen lower its U.S. tax bill saving the company hundreds of millions of dollars a year—money that wouldn't flow into the U.S. Treasury.

    If it goes ahead, it would be an unusual use of the controversial and complex maneuver known as an inversion. While well tested among pharmaceutical and manufacturing companies that earn much of their income overseas or have assets like patents that are held offshore, the move has never been attempted by a major U.S. retailer, according to tax experts.

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