How will US Tax Reform impact EMEA pharmaceutical companies that have a presence within the US?

11 July 2018

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The 2017 tax reform reconciliation act is the most significant overhaul of the US tax code since 1986. It lowers corporate and individual rates, implements a territorial taxation system, limits the interest rate deduction for corporations, creates new taxes and adds numerous new rules.

The law will have a substantial impact on all Pharmaceutical and Life Science companies - US based and non-US based. Non-US headquartered companies doing business in the United States need to understand which provisions are relevant to their businesses and how these provisions will impact the cost of doing business.

While the Act reduces the corporate income tax rate to 21%, which is closer to the OECD average, provisions such as the Base Erosion and Anti-Abuse Tax (BEAT), limitation of the interest deduction and limitation of the net operating losses (NOLs) to 80% of income may increase the cost of operating in the United States.

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Globally, the reaction has been mixed. The US Tax rate was always seen as high but it probably came down lower than most expected putting the level of cohesion in international tax system under strain.

Pharmaceutical and life sciences companies should consider assessing the impact of the changes on their supply chains and operational structures. They must carefully make these business decisions in the face of uncertainty and also take into consideration the opportunities the tax reform may present to restructure their operations. Holistic modeling and scenario planning are a must.

For more information on the wider impact of the provisions on the industry, our global industry team recently hosted a webinar for clients which you can still watch online on demand. I hope you find it useful and please do get in touch if you have any questions. 

Andrew Packman | Global Pharmaceutical & Life sciences Tax leader
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