Navigating the complexities of cross-border mergers, particularly those involving U.S. outbound and inbound corporations, can be managed if you are aware of the common challenges that may arise.
Companies should be cognizant of "anti-inversion rules" under Section 7874 and 367(a), designed to prevent tax evasion by U.S. corporations relocating overseas.
The IRS has shown a willingness to offer favorable private letter rulings on Section 7874 issues if the matter is not an inversion in spirit.
Companies should also be mindful of Section 367(a)’s "Helen of Troy" regulations which impose a shareholder tax on U.S. holders exchanging in an outbound merger.
Domestication of foreign businesses into U.S. top companies has become more common due to lower U.S. corporate tax rates, however, it introduces potential issues under Section 367(b) and the Passive Foreign Investment Company (PFIC) rules.