More and more American groups relocate their business to Europe after taking over companies in the region, attracted by lower taxes that will allow them save hundreds of millions of dollars. Some of the largest mergers and acquisitions that have taken place this year have involved the transfer of headquarters abroad, especially in Europe. These transactions take place at a time when politicians in Washington have intensified calls for reform of the U.S. tax system.
Perrigo, a pharmaceutical group based in Michigan announced that following the acquisition of Irish biotech company Elan it will transfer its headquarters in Ireland, where it anticipates a tax of 17%, almost half of the 30% in the U.S. Deutsche Bank estimates that the Perrigo will accordingly save $118 million per year.
Another takeover in the pharmaceutical sector, the acquisition of Warner Chilcott by Actavis will result in another relocation to Ireland. Actavis will pay tax of 17%, which will save the company $150 million in the next two years.
The American advertising company Omnicom announced that after the $35 billion merger with Publicis, the newly formed group will be registered in the Netherlands, saving about $80 million per year.
Liberty Global will be relocated to the UK, where it will pay a lower tax than in the U.S., 21%, after the acquisition of Virgin Media.
Many American companies that have made acquisitions in Europe have not revealed how much they save in taxes. The tax advantages are not the main reason for such purchases or transfers of headquarters; analysts say the number of U.S. companies who want to move abroad is increasing.
“We have seen an increasing number of US inversions in the last couple of years, first on a standalone basis and, more recently, as part of M&A deals. As cross-border M&A activity increases, this trend may continue,” said Mark Kingstone, a tax partner at Linklaters law firm.
This practice coincided with the intensification of a political debate in the United States on issues of taxation, as Democrats, Republicans and the White House agree that the current code, which imposes a maximum tax of 35%, but offer a variety of exemptions, must be reformed.
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