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Walgreen Completes 'Non-Inversion' With Alliance Boots

by Mike Godfrey, Tax-News.com, Washington

02 January 2015


On December 31, Walgreen Co. completed its combination with Alliance Boots GmbH to form Walgreens Boots Alliance, Inc, with its headquarters remaining in the United States, rather than being transferred abroad by way of a "corporate inversion."

At a special meeting of shareholders held on December 29, Walgreens shareholders approved the share purchase to combine fully the two companies into what is being called "the first global pharmacy-led health and wellbeing enterprise." It will include Walgreen Co. (the largest drugstore chain in the US), Boots (the UK and Ireland's leading pharmacy-led health and beauty retailer), and Pharmaceutical Wholesale and International Retail (including Alliance Healthcare, Europe's largest pharmaceutical wholesaler).

It was confirmed that the companies have received all regulatory approvals required to complete the transaction and that the new holding company will be domiciled in the US and headquartered in Deerfield, Illinois. Walgreen Boots Alliance common stock will be listed on the NASDAQ Stock Market.

Although Walgreens itself had an effective tax rate close to the headline US corporate tax rate of 35 percent, it was decided in August 2014 not to gain the reported USD4bn in tax savings over five years that could have been available to it by moving the company's base to Switzerland, where Alliance Boots was headquartered.

Corporate inversions have been used by US companies when bidding for foreign companies as a means of moving away from America's high corporate tax rate. Under the present tax code, a company that merges with an offshore counterpart can, under certain conditions, move its headquarters abroad and take advantage of the lower corporate tax rates in foreign jurisdictions.

When taking the decision in August not to transfer its tax domicile abroad, Walgreens had then confirmed that it "undertook an extensive analysis to explore the feasibility of a restructured inversion transaction that would provide the company with the customary level of confidence needed to withstand Internal Revenue Service (IRS) review and scrutiny."

Aside from concerns that it could have been involved in a protracted argument with the IRS, and that it could risk losing a major portion of its revenues derived from Government-funded reimbursement programs, Walgreens was also thought to have been influenced by the growing anti-inversion political discussions in the US, draft legislative proposals in Congress, and White House efforts, which became a reality in September, to introduce administrative actions and reduce the tax benefits from inversions.

TAGS: compliance | tax | business | holding company | tax compliance | mergers and acquisitions (M&A) | corporation tax | offshore | health care | transfer pricing | tax rates | Switzerland | United States | tax breaks | retail | Healthcare | Europe | Healthcare

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