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Concept
Tax inversion
Summary
A tax inversion or corporate tax inversion is a form of tax avoidance where a corporation restructures so that the current parent is replaced by a foreign parent, and the original parent company becomes a subsidiary of the foreign parent, thus moving its tax residence to the foreign country. Executives and operational headquarters can stay in the original country. The US definition requires that the original shareholders remain a majority control of the post-inverted company.
The majority of the less than 100 material tax inversions recorded since 1993 have been of US corporations (85 inversions), seeking to pay less to the US corporate tax system. The only other jurisdiction to experience a material outflow of tax inversions was the United Kingdom from 2007 to 2010 (22 inversions); however, UK inversions largely ceased post the reform of the UK corporate tax code from 2009 to 2012.
The first inversion was McDermott International in 1983. Reforms by US Congress in 2004 halted "naked inversions", however, the size of individual "merger inversions" grew dramatically; in 2014 alone, they exceeded the cumulative value of all inversions since 1983. New US Treasury rules in 2014–16 blocked several major inversions (e.g. 2016 USD54 billion AbbVie–Shire plc inversion), and the Tax Cuts and Jobs Act of 2017 (TCJA) further reduced the taxation incentives of inversions. , there have been no material US inversions post-2017, and notably, two large Irish-based tax inversion targets were acquired in non-tax inversion transactions, where the acquirer remained in their higher-tax jurisdiction: Shire plc by Japanese pharma Takeda for US64 billion (announced in 2019, expected to close in 2020); in addition, Broadcom Inc. redomesticated to the United States.
the most popular destination in history for US corporate tax inversions is Ireland (with 22 inversions); Ireland was also the most popular destination for UK inversions.
Official source
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