A global guide to business relocation 2015 Contents 01 Introduction 67 Key country profiles 113 Isle of Man 02 Relocation options – EMEA 114 Italy 10 Key country summary 68 Belgium 115 Japan 71 Cyprus 116 Kenya 12 Key country profiles 74 Hungary 117 Korea – Americas 77 Ireland 118 Latvia 13 Argentina 80 Luxembourg 119 Lithuania 17 Brazil 83 Malta 120 Malaysia 21 Canada 86 Netherlands 121 Namibia 24 Chile 89 Spain 122 Peru 27 Colombia 92 Switzerland 123 Poland 30 Mexico 96 United Arab Emirates 124 Portugal 33 Panama 99 United Kingdom 125 Qatar 36 Puerto Rico 126 Russia 40 United States 102 Other territory profiles 127 Slovak Republic 103 Algeria 128 South Africa 43 Key country profiles 104 Austria 129 Sweden – Asia Pacific 105 Botswana 130 Taiwan 44 Australia 106 Czech Republic 131 Turkey 48 China 107 Denmark 132 Uganda 52 Hong Kong 108 Estonia 133 Vietnam 56 India 109 Finland 134 Zimbabwe 60 New Zealand 110 France 63 Singapore 111 Germany 135 Contacts 112 Greece This information has been provided by Grant Thornton member firms within Grant Thornton International Ltd and is for informational purposes only. Grant Thornton International Ltd cannot guarantee the accuracy, timeliness or completeness of the data contained herein. As such, you should not act on the information without first seeking professional tax advice from one of the contacts at the rear of the publication. Introduction Many companies from large multinationals to entrepreneurial businesses are choosing to relocate part or all of their operations to new territories. There are a number of cost and commercial reasons why a group may consider relocating, but it is also important to understand the consequences. The key to successful business relocation is early planning, clear commercial objectives and careful execution. Our relocation guide provides pragmatic advice for executives, including outlining the drivers of relocation, the types of activity commonly relocated and the commercial, cost and tax factors of popular relocation destinations. Grant Thornton member firms around the world have significant experience in advising clients on how their businesses can benefit from relocation. The highest profile cases involve full corporate migrations or inversions – the head office and holding company structure transferring to a new jurisdiction. However the options are numerous and the right answer may be much simpler, from setting up a regional hub to offshoring support services. We hope you will find this guide useful in assessing whether business relocation is right for you. If you would like to discuss the next steps please contact your own Grant Thornton adviser or one of the Grant Thornton contacts listed. A global guide to business relocation 1 Relocation options Governments continue to use investment incentives and simplified compliance arrangements to attract successful, entrepreneurial businesses. However, the Organisation for Economic Co-operation and Development (OECD) Base Erosion and Profit Shifting (BEPS) initiative which seeks to ensure the tax system keeps pace with the shift towards an increasingly borderless digital economy, is likely to impact on worldwide tax rules. While still under development it could eventually lead to significant tax change affecting relocation. Grant Thornton is playing an active role in the discussions and consultations on this issue making us well placed to help you navigate the considerable current complexity and mitigate risk. What is business relocation? Whilst most people instantly think of full corporate migrations for business relocations, there are a number of much simpler options which can also achieve excellent efficiencies and cost savings. Determining the right structure and location for a business requires assessing numerous competing factors and will be individual to each group, but some common examples are: Full migration This type of relocation has been highlighted by some high profile migrations and can be either a relocation of headquarters or holding company or both. A migration of the holding company typically involves an inversion, whereby a new holding company is set up above the existing group holding structure. However, it can sometimes be achieved by migrating the management and control of a holding company to a different jurisdiction. Whilst the benefits can be significant, for example, moving to a country with a simpler tax and legal framework, there can be issues in terms of exit costs and there needs to be a strong appetite for change to make this relocation work. It is also important to consider any reputational challenges. Use of Intellectual property (IP) Increasing use is being made of IP holding regimes by many international groups. Such companies are responsible for holding companies and regional hubs the ongoing development, protection and exploitation of IP or development of regional business. Given the need for IP protection and the significant income it can generate, groups are considering the best place to locate these assets to maximise protection and manage tax in the most efficient way. As the OECD BEPS initiative continues to develop through 2015 the impact on the way cross-border activities take place will inevitably change as governments look to counter what they see as harmful tax practices more effectively. Offshoring There can be significant cost savings through offshoring. In its simplest form offshoring could be the relocation of a support function overseas. Increasingly, this has been extended to more value-add functions including research and development (R&D) centres and treasury companies. For the former, such centres may be located where there is a wealth of technical staff, efficient tax arrangements and incentives to encourage investment. Changing the risk model Where it is not appropriate to physically relocate certain functions, then an alternative may be to operate through a commissionaire, franchising or licence model. Under such an arrangement, the risks borne by the local distribution or manufacturing entity may be substantially reduced. This in turn can limit the profits attributable to these entities, with increased profits being generated by the entrepreneur company. This involves limited physical disruption to the business. It is worth noting that commissionaire arrangements have been a concern of tax authorities for a number of years and they have now become one of the higher profile issues within the OECD BEPS initiative. 2 A global guide to business relocation Relocation options What drives business relocation? There are significant potential benefits to relocating abroad – access to markets, simplified compliance and cost savings are cited as key reasons. The popularity of business relocations is driven by a series of global economic factors: • globalisation: the disparity in growth rates between • competitive advantage: as more corporate groups take emerging markets and mature economies is accelerating the advantage of the opportunities arising from relocation, it pace of globalisation, as companies seek to access capital, is important to maximise value by reducing costs, thereby goods or markets in different regions of the world. There keeping a competitive advantage is also a growing pool of internationally mobile employees • tax incentives: many governments are adjusting their tax willing to relocate for these opportunities regimes to help encourage companies to relocate and create • slow economic recovery: pressure on businesses to reduce jobs within their markets. Particular areas of focus include costs continues as they continue to respond to the last IP management and other high-value functions. Where global recession. There can be significant operational and commercial activities are located in these jurisdictions, administrative benefits arising from centralising functions overall effective tax rates might benefit from such incentives and relocating them offshore to an appropriate location, • other: a number of other factors can also be considered while tax cost might also be lower when relocating including, local business environment; • increased compliance burdens: other regimes, particularly government incentives; personal and corporate liability; in the G20 economies, are introducing complex compliance culture; governance; language; political reasons, social systems to control behaviour and discourage loss of tax stability and ease of inward investment amongst others. revenue across borders. This is creating a huge compliance burden for groups and arguably is accelerating the migration of businesses away from those jurisdictions A global guide to business relocation 3 Relocation options What activities can be relocated? A group’s typical supply chain has three key aspects and examples of functions and ways to relocate these are set out below: Functions Examples Ways to relocate Back office • Offshoring Support Customer support support • Treasury companies • Centralisation Research & Manufacturing Business • Changes to risk model development & sales • Research centres of excellence Executive • IP holding companies Value-add IP management decision making • Migration of holding company Support functions Offshoring: Relocation of routine functions such as support services is common and is often relatively straightforward. Typically the moves are driven by operational savings and low costs. An example of this is Malta, a popular offshoring location. Treasury companies: Treasury companies have widely been used in group structures to manage