Financial valuation considerations in relation to tax issues

The EFB (Ecole Française du Barreau) organized a morning session on 27 January 2020 with magistrates, lawyers, legal experts and a member of the Consultancy Department of the Directorate of National and International Audits (DVNI) to discuss issues related to financial valuation in various tax contexts.

As legal experts, SORGEM Evaluation partners took part in various round-table discussions.

  • Valuation issues related to divestitures / restructurings

The speakers recalled the main principles for valuing corporate securities and the provisions of the CGI (distinguishing between listed and private companies), discussed the premiums and discounts that may apply, and presented the tax consequences of a poor valuation.

  • Valuation issues in the context of intra-group transfer pricing

The speakers discussed intra-group interest rates and royalties related to intangible assets (trademarks, patents, etc.). They discussed the latest tax and jurisprudential developments, as well as the contribution of financial experts for the analysis of borrowers’ risk profile and the valuation of intangible assets using the various methods generally used.

  • Valuation issues in relation to management packages

The speakers began with a reminder of the existing mechanisms allowing employees to invest in their company’s securities. They subsequently presented the latest developments, particularly in terms of taxation, leading to changes in the type of securities in which managers can invest.

They displayed valuation methods for options (preferred stocks Ratchet, warrants, call options) and interest rate instruments (interest rate preferred stocks, convertible bonds, shareholder loans, etc.).

They also shared their experience of tax audits and litigation related to this topic and commented on recent decisions. In this context, some practices leading to difficulties during tax audits were highlighted.