News & insight

Is consulting in international taxation a good business?

February 1, 2021

GUILLERMO NARVAEZ
International Tax Technical Director of the Kreston International Tax SIG
Kreston FLS, Mexico

For many decades, international tax (INTAX) advisory has been a key feature of the most important business-focused service firms. In many countries, this service was initially provided by accounting firms before extending to legal firms too. Why is it relevant to large international law/ accounting firms to advise on INTAX? In my view, the reason lies in the following points:

• INTAX is highly specialised. And INTAX is becoming ever more complex.
• INTAX is a subject always related to multinational companies (MNE). This is obviously due to operations being carried out or with effects in more than one jurisdiction.
• INTAX means competitiveness among jurisdictions; different states will compete to win foreign investment, which will generate wealth in their territories.

Competitiveness between states expands the possibilities of the MNEs to distribute their activity among multiple jurisdictions with the purpose of achieving greater fiscal efficiency. The freedom of choice to decide where a business is going to do certain activities contributes to forecasting the net global tax rate an MNE may pay. This is, in a nutshell, an exclusive attribute of the jurisdictions identified as ‘sovereignty’.

Accordingly, the jurisdictions create an offer for the MNEs to carry out tax strategies using various elements such as royalty and interest payments, hybrid operations, permanent establishments, strategies related to capital gains, or complicated corporate structures in several jurisdictions with attractive low or nil tax impact, among many other elements to assess.

As if these were not enough, in 2015 the OECD1 launched the BEPS2 project, trying to stop the shifting of profits to jurisdictions where no value was generated to the taxable activities. This generated a straight and quite clear implication – an urgent need for MNEs and companies doing international operations to be advised to efficiently face the new reality in INTAX.

Kreston’s INTAX experts and global collaboration has advantages over many other organisations; with more than 200 firms located in 110 countries, we cover the main economies of the world in areas where MNEs perform a large part of their operations.

There is a tendency to assume that only the large accounting firms (Big Four) or law firms are able to provide INTAX services. Yet good advice on international tax is provided by specialists who collaborate with other firms, regardless of company size.

Kreston’s INTAX experts and global collaboration has advantages over many other organisations; with more than 200 firms located in 110 countries, we cover the main economies of the world in areas where MNEs perform a large part of their operations.