Drivers of Value Chain Transformation
Changes in value chains are driven by:
- the ongoing digitalization of products;
- evolving business operations, including new digital routes to market, artificial intelligence, Industry 4.0 and digital centres of excellence;
- ESG initiatives and sustainability objectives.
As a result, the location where an MNE creates value is continuously evolving. This often leads multinational enterprises to restructure their business operations.
Tax Implications of Value Chain Transformation and Business Restructuring
Business restructurings can have significant one-off or long-term implications for an MNE’s tax position. Therefore, organizations should carefully consider the following tax aspects:
- exit taxes arising from the cross-border transfer of assets;
- the need for a new transfer pricing policy reflecting the transformed value chain or new products;
- potential permanent establishment risks resulting from cross-border activities; and
- indirect tax implications, such as VAT and excise duties, arising from changes in physical supply chains, invoicing flows or product characteristics.
Value Chain Management and Transfer Pricing
Our experienced multidisciplinary Value Chain Management (VCM) team helps organizations assess and manage tax risks while identifying opportunities throughout the transformation process. We have developed a proven and structured approach that enables the design and implementation of an effective operating model in a timely manner.
To support informed decision-making, the VCM team leverages a range of analytical tools and methodologies to deliver practical and sustainable outcomes.
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FAQ
When is Value Chain Management relevant for a multinational enterprise?
Value Chain Management becomes particularly relevant when an organization changes its business model, supply chain or operating model in response to digitalization, market developments, ESG objectives, artificial intelligence or international expansion. As these changes can affect where value is created within the organization, it is important to assess the related tax implications, transfer pricing considerations and potential restructuring issues.
What are the tax implications of changes to a value chain?
Changes to a value chain can give rise to a variety of tax considerations, including adjustments to transfer pricing policies, exit taxes resulting from cross-border transfers of functions, assets or activities, new permanent establishment risks and indirect tax implications such as VAT and excise duties. An early assessment can help identify and manage potential tax risks.
How does Value Chain Management support business transformations?
Value Chain Management helps organizations understand the relationship between business activities, value creation, supply chains and tax structures. This enables multinational enterprises to assess the tax implications of a business transformation, operating model change or international restructuring at an early stage and make better-informed decisions.
