When Tax and Corporate Perspectives Diverge

In many sit­u­a­tions, tax plan­ning and cor­po­rate struc­tur­ing pur­sue the same objec­tive: cre­at­ing an eco­nom­i­cal­ly sound and legal­ly sus­tain­able structure.

In prac­tice, how­ev­er, tax opti­mi­sa­tion and cor­po­rate law con­sid­er­a­tions may not always align per­fect­ly.

Exam­ples include:

• tax-dri­ven share­hold­ing models
• amend­ments to share­hold­er agreements
• cor­po­rate restructurings

While a solu­tion may appear tax-effi­cient, cor­po­rate law issues may arise regard­ing lia­bil­i­ty, cor­po­rate gov­er­nance or the legal valid­i­ty of cer­tain arrangements.

Sit­u­a­tions in which tax con­sid­er­a­tions and cor­po­rate law require­ments diverge are not unusu­al in prac­tice. Tax plan­ning often focus­es on effi­cien­cy and opti­mi­sa­tion, while cor­po­rate law empha­sis­es for­mal struc­tures, gov­er­nance rules and lia­bil­i­ty con­sid­er­a­tions. When these per­spec­tives are not suf­fi­cient­ly aligned, ten­sions can arise that only become vis­i­ble at a lat­er stage.

Address­ing these issues ear­ly can help ensure that tax-dri­ven arrange­ments are imple­ment­ed with­in a legal­ly sound frame­work. In many cas­es, rel­a­tive­ly small struc­tur­al adjust­ments are suf­fi­cient to rec­on­cile tax objec­tives with the require­ments of cor­po­rate law.

A care­ful legal analy­sis can help iden­ti­fy such ten­sions ear­ly and devel­op struc­tures that are both tax-effi­cient and legal­ly robust.

Fur­ther exam­ples are dis­cussed under Tax-Dri­ven Cor­po­rate Struc­tures.

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Author: Sabine Unkel­bach-Tom­czak is a Ger­man attor­ney (Recht­san­wältin) and cer­ti­fied spe­cial­ist lawyer for tax law. Her advi­so­ry work focus­es on legal issues at the inter­sec­tion of tax law, cor­po­rate law and cross-bor­der mat­ters.
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