Complex Business Combinations
The need to fill the shrinking drug pipeline has fuelled a resurgence in mergers and acquisitions (M&A), in-licensing arrangements and formation of partnerships and joint ventures, a trend PricewaterhouseCoopers expects to continue. Each of these strategies comes with significant tax implications, depending on how a company accounts for acquisition-related items, structures royalty payments, and shares profits and losses among different legal entities and locations.
Competition to Attract Pharmaceutical and Life Science Investments
Pharmaceutical and life sciences companies are interested in locating intellectual property development in areas that offer economic and tax incentives and to expand their presence in emerging markets that promise growth potential. International competition is intensifying to attract new investment by pharmaceutical and life sciences companies, particularly from emerging markets, such as China. According to PricewaterhouseCoopers, this trend may further drive profit growth to the East, but companies will need to balance increased income with higher tax rates and potential price controls.
"To manage effective tax rates, pharmaceutical and life sciences companies will need to develop tax planning consistent with their new business models and carefully balance risk with opportunity," said Simon Friend, global pharmaceutical and life sciences leader at PricewaterhouseCoopers. "Tax will need to be involved sooner and up front, a trend we already are seeing throughout the industry."
In Pharma 2020: Taxing times ahead - Which path will you
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