The pharmaceutical company Horizon Pharma plc has incorporated itself overseas in Ireland, following its $600 million acquisition of Vidara Therapeutics International plc.
Corporate inversion has become a popular strategy for companies as a means of reducing their tax burden.
Earlier this year legislation was introduced that tightened inversion rules under section 7874 attempting to prevent U.S. companies from moving their tax residence overseas to avoid U.S. taxation.
Essentially the legislation was designed so that certain inversions, after May 2014, would remain as US corporations for tax purposes. In addition, US Treasury Secretary Jack Lew has expressed his desire to impose limits on the tax advantages associated with corporate inversion deals.
However, Horizon is one of the first companies that has managed to carry out an inversion deal since the new legislation.
A tax inversion deal is only possible if the shareholders of the acquired company receive stock that accounts for at least one fifth of the combined entity.
There is a rise in the number of American healthcare companies thinking about corporate inversion as a means of avoiding the high corporate tax rate in the US – corporate taxes in the country are one of the highest in the developed world.
Another recent inversion deal that generated a lot of attention was the Burger King Worldwide, Inc. acquisition of Tim Hortons, Inc., which is based in Canada. The deal which is valued at approximately $11.4 billion allows the new entity to be headquartered and publicly listed in Canada.