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Mylan To Proceed With Corporate Inversion

by Mike Godfrey, Tax-News.com, Washington Wednesday, August 13, 2014

During remarks made in conjunction with release of the company's interim financial results to June 30, 2014, Mylan Inc's CEO Heather Bresch confirmed that it is to proceed with its "corporate inversion," to acquire some of Abbott Laboratories' non-United States businesses and move its tax residence to the Netherlands.

While it has been stressed that the transaction will further diversify Mylan's business, strengthen the company in its largest markets outside of the US, and provide new opportunities for growth, it has also been indicated that Mylan's tax rate is also expected to be lowered "to around 20-21 percent in the first full year, and to the high teens thereafter, enhancing the company's competitiveness."

Corporate inversions have been used by US companies when bidding for foreign companies as a means of moving away from America's 35 percent corporate tax rate. Under the present tax code, a company that merges with an offshore counterpart can move its headquarters abroad, and take advantage of the lower corporate tax rates in foreign jurisdictions, if at least 20 percent of its shares are held by the foreign company's shareholders after the merger.

Legislative efforts in Congress have largely favored putting the minimum foreign shareholding requirement up to 50 percent. Details of the Mylan-Abbott transaction show that Mylan shareholders will end up owning approximately 79 percent of "New Mylan," incorporated in the Netherlands, and Abbott will indirectly only own approximately 21 percent.

However, with regard to the growing anti-inversion political discussions in the US, and in particular, to the legislative proposals in Congress and White House efforts to look at possible administrative actions that could reduce the tax benefits of inversions, Bresch said that "there's tremendous speculation, and really, at this point in time, that's all it is. And we are continuing to move forward. We feel solid about our transaction."

She felt that "it would be challenging to change the US tax code to stop inversion without punishing other foreign companies. Being punitive and not allowing us to be competitive, I do not believe, is in our country's best interest, and I hope that prevails at the end of the day. We're obviously continuing to pay US taxes, as well as a lot of these foreign companies are paying US taxes and creating US jobs."

Bresch concluded that, "as much as the Senate may want to vote on something, I just continue to think the odds of anything getting done, and looking at one little snapshot of our tax code which needs significantly reforming, is unlikely."

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