The substance test for tax purposes in the cross-border private equity fund structuring

The substance test for tax purposes in the cross-border private equity fund structuring

Abstract:

In the current tax framework, one of the hottest topics while designing and implementing cross-border private equity investment structures is the substance test for tax purposes. The latest developments on domestic and international anti- avoidance rules have shown how these rules are based on the substance test. Test that tries to deny the access to tax benefits like exemptions, tax credits, low rates, etc. by challenging the economic reality and business purpose of the taxpayer. Private equity players are aware of this issue, since, in some case, they are forced even to adapt their business models from an operational point of view.

Keywords: Private equity, fund structuring, substance, anti- avoidance, alternative investment fund managers.