Category: Tax opportunity

Tariff War In Life Sciences: How to Manage Customs Risks and Costs

The U.S.-EU tariff war is raising costs and tightening customs scrutiny for pharmaceuticals, medical devices, and IMPs. With 25% tariffs on exports, companies can no longer rely on nil-value declarations for clinical trial shipments, risking higher costs, delays, and compliance issues. To navigate this, firms must adopt ERP-driven customs management, ensuring accurate HTS classification, tariff tracking, and duty mitigation to protect supply chains and control costs.

Mastering Licensing Agreements Financial Management for Life Sciences Success

Effective financial management of licensing agreements is crucial for small and mid-tier life sciences companies, as these agreements provide essential funding and strategic collaboration opportunities. To navigate the complexities of licensing, companies should adopt best practices such as aligning milestone payments with key value-driving events like clinical trial successes, tailoring royalty structures to market realities through tiered models, and leveraging modern ERP systems. These systems offer integrated project management and real-time tracking of milestones and costs, enhancing transparency and efficiency. By implementing these strategies and utilizing advanced financial tools, companies can foster innovation, mitigate risks, and build partnerships that drive the development of life-changing therapies.

Is Finance The Weak Link in Biotech Innovation?

In 2025, financial innovation is pivotal for small and mid-tier life sciences companies aiming to navigate complex licensing agreements effectively. Implementing modern Enterprise Resource Planning (ERP) systems is essential, as they centralize data, automate tasks, and integrate AI capabilities, thereby enhancing financial operations. By adopting best practices and leveraging technology, companies can build partnerships that foster innovation, mitigate risks, and deliver life-changing therapies to patients worldwide.

Poor Cash Flow Reporting Holds Back Life Sciences Innovation

Finance teams in small to mid-cap pharma and biotech face complex cash flow management issues under both US GAAP and IFRS. Cash flow statements often reveal a troubling gap: they lack the actionable insights needed for strategic decisions. In an industry where every dollar counts, failing to address these limitations jeopardizes a company’s financial agility and its survival. Major pain points include the pressure to classify cash flows accurately as operating, investing, or financing activities, and the added complexity of foreign currency transactions due to fluctuating exchange rates. Mergers and acquisitions further complicate reporting, requiring precision in separating acquisition-related expenses and liabilities. Additionally, transactions like contingent considerations and stock compensation arrangements bring unique challenges in presenting clear and accurate cash flows, often leading to confusion and restatements.

The Value of Your Company Unveiled Thanks to Modern ERP Financial Reporting

In small and mid-cap life sciences companies, finance teams are stuck in legacy accounting practices that stifle innovation. Bloated Excel sheets, convoluted explanations, and feedback loops that feel more like interrogations leave R&D teams frustrated and distracted. These outdated processes don’t just waste time—they erode the value of R&D itself. It’s time for non-finance leaders to demand streamlined, transparent tools that support growth, not block it.

As a result, the journey from lab to market hinges on the seamless integration of R&D with strategic financial oversight.

Below, we explore why CFOs – and stakeholders – must rethink their approach, replacing outdated methods with more modern and integrated solutions to protect and amplify R&D success.

Outdated Accounting Practices Hold Back R&D Success

In small and mid-sized life sciences companies, outdated accounting methods in finance are causing more harm than meets the eye. Legacy systems—marked by complex Excel spreadsheets and lengthy feedback loops—are overwhelming R&D teams. These inefficient practices waste time and drain the value of R&D, leading to delays in innovation. It’s time for non-finance leaders to push for streamlined, transparent accounting tools that drive progress rather than hinder it. The path from lab to market depends on integrating R&D with modern, strategic financial oversight. CFOs and stakeholders must embrace up-to-date, integrated solutions to secure R&D success and company growth.

Outdated Accounting Processes Hinder Revenue Recognition Efficiency

Outdated accounting processes in small and mid-sized life sciences companies significantly hinder revenue recognition efficiency. Reliance on legacy systems and manual methods leads to inaccuracies and delays, especially when scaling operations. To address these challenges, companies should modernize their financial processes by implementing advanced ERP systems and adopting automation. These changes will improve accuracy, efficiency, and scalability, ensuring compliance with revenue recognition standards like ASU 2014-09 and IFRS 15. By upgrading systems, companies can streamline revenue recognition, ensure compliance, and drive growth. 

Shipping IMPs for Clinical Trials in Europe: Best Practices

Shipping Investigational Medicinal Products (IMPs) for clinical trials in Europe is a critical yet complex process. IMPs, being unapproved drugs used in clinical trials or Early Access Programs (EAPs), require meticulous handling to navigate customs regulations, value-added taxes (VAT), and specific local requirements. Common mistakes in this process can lead to significant delays and increased costs. To avoid these pitfalls, it’s essential to understand and adhere to best practices, ensuring compliance and efficiency in the supply chain. For a comprehensive guide on these practices, refer to the full article.

Electronic Invoicing obligations in Europe as of 2023

Italy was the first country to in force B2G (Business to Government) electronic invoicing (e-invoicing) in 2014. Italy was also the pioneer to introduce B2B and B2B in 2019, for almost all Italian companies. Currently, several EU countries have full E-invoicing mandatory only for B2G : Spain, France, Portugal, Croatia, the Czech Republic, Poland, Finland, Norway, Denmark, Sweden, Estonia, Lithuania, the Netherlands, Serbia and Luxembourg (on-going). Austria, Belgium and Germany have partial B2G obligations, mostly because of languages, differences between central and federal states or immediate payments. Italy is currently the only country with compulsory e-invoicing for B2G, B2B and B2C areas. But things are about to change, for 2 reasons: 1) Advantages of e-invoicing and 2) New Policies from the EU. 1) Advantages of e-invoicing 2) New Policies from the EU In 2023, the EU Directive in force the obligation that each invoice issued will have to comply with the regulatory and technological requirement of the Payee’s country. In other terms, the only possibility to comply is to adopt electronic invoicing. If there are so many advantages to e-invoicing, why so many companies/countries did not adopt it so far? It’s because of local Policies and because companies are generally lacking expertise in digitalization and underestimate the benefits of e-invoicing. Finally, there is no common technologic solution or platform and countries have been adopting self-standards. However, the use of an ERP could highly facilitate the integration of e-invoicing, with minimum efforts and costs (if you have the good one). To summarize, the adoption of the e-invoicing for B2B transactions will become a must have not only because of Invoicing Policies changes, but also because of increased constraints on digital management of tax compliance adopted by several EU countries, if the organizational benefits did not convince you… The table below shows the current situation in the EU big 4, and UK and Switzerland in terms of e-invoicing.

What is transfer pricing ?

This article will provide you with a high-level methodology for the different methods and types of transfer pricing. You will not become a tax expert, but next time you will be asked the question “what is your transfer pricing method”, you probably won’t respond “Cost +”… Multinational companies, MNE, used to allocate profits (earnings before interest and taxes – EBIT) among its various subsidiaries, generally in “tax friendly” countries to benefit from double non-taxation. However, since the financial crisis in 2008, the G20 countries put tax, specially tax avoidance, on the top of their agenda. In 2012 a plan against Base Erosion and Profit Shifting was elaborated. BEPS was just born. The Article 9 of the OECD Model Tax Convention on Transfer Pricing regulations require transfer prices within a controlled group to meet the arm’s length principle. In other words, transactions between related parties must take place under market conditions. The arm’s length principle provides broad parity of tax treatment for members of MNE groups and independent enterprises as it avoids the creation of tax advantages or disadvantages that would otherwise distort the relative competitive positions of either type of entity. There are five different transfer pricing methods in two categories: Regardless of the method, master and local files as well as international comparable transactions are required. The traditional transaction methods, commonly and wrongly called “Cost +”, are used for a wide range of operations such as purchase ans sale of commodities (goods), lending money and services. Generally the transactions are straight forward and the margins involved are rather small. Transactional profit methods require a profound analysis of routine and non-routine transactions and the elements of the value chain of the companies involved. It details risks occurred by participant companies and the margins at play are potentially higher. If the latter is more complex, it has a significant benefit for the companies which implement it; tax transparency across several jurisdictions. You can continue reading the chapters below to gain a comprehensive and high-level understanding of transfer pricing. 1. Overview of transactions 2. OECD Transfer Pricing Guidelines & the Arm’s Length Principle 3. Functional and risk analysis 4. Transfer pricing analysis 5. When to apply traditional transaction methods? Subject to the guidance in paragraph 2.2 of the OECD Guidelines for selecting the most appropriate transfer pricing method in the circumstances of a particular case, generally it is assumed that: 6. When to apply Transactional profit methods? While in some cases the selection of a method may not be straightforward and more than one method may be initially considered, generally it will be possible to select one method that is apt to provide the best estimation of an arm’s length price. However, for difficult cases, where no one approach is conclusive, a flexible approach would allow the evidence of various methods to be used in conjunction. In such cases, an attempt should be made to reach a conclusion consistent with the arm’s length principle that is satisfactory from a practical viewpoint to all the parties involved, considering the facts and circumstances of the case, the mix of evidence available, and the relative reliability of the various methods under consideration. TNM method PSM method This method was revised by Action 10 of the action plan against Base Erosion and Profit Shifting (BEPS) in June 2018. PSM may be considered the most appropriate transfer pricing method in a specific set of circumstances only: Besides the constraints already mentioned in the previous paragraph it is also important to indicate when it may not be appropriate to use the PSM: Despite it’s complexity, the PSM is being largely adopted because it enhances tax transparency specially for companies subject to Country-by-country reporting (CbCR) as the tax authorities have a complete view of the routine and non-routine thanks to the analysis of the value chain. As the profits are jointly shared, it is likely to satisfy the tax administrations of the parties involved. Sources: OECD Transfer Pricing Guidelines for Multinational Enterprises and Tax Administrations ISBN 978-92-64-26512-7 report_on_the_application_of_the_profit_split_method_within_the_eu_en.pdf (europa.eu)

Future Tax Policy for Digital Economy

The digitalization of the economy remains an important tax challenge and was identified as an area of focus of the Base Erosion and Profit Shifting (BEPS) Action Plan. With the objective to change the actual profit allocation rules for digital companies two Pillars were identified: Grouped under an Inclusive Framework (“IF”), the Program of Work (“PoW”) was initiated in May 2019 by the G20 ministers jointly with the OECD. Following several revisions, the IF and OECD adopted a consensus based solution on Pillar One: the “Unified Approach”. On January 31, 2020, the OECD endorsed the Pillar One and approved to negotiate its principles under the Unified Approach which is intended to be finalized by 2020. The proposal would have to be adopted by the G20 before getting implemented in the various jurisdictions. The concept is to design a solution that attracts support from all members of the Inclusive Framework. The Secretariat’s proposal for a “Unified Approach” has been developed with this goal in mind. Key features of a solution, which would include the following: Scope. New Nexus. New Profit Allocation Rule going beyond the Arm’s Length Principle. Increased Tax Certainty delivered via a Three Tier Mechanism. To summarize, reaching a consensus amongst 137 countries participating in the IF is a great challenge, but the IF has already shown a huge determination in bringing the Unified Approach in such short notice. In an ever evolving landscape of regulations*, we recommend multinational companies to develop contingency plans, change scenarios and implementation without delay. For further information: simon.massel@lifescienceservices.ch Source: http://www.oecd.org/ *US GOP Tax Reform, the EU Anti-Tax Avoidance Directives (“ATAD I” and “ATAD II”), BEPS Action Plans, Pillars One and Two

Tax opportunities post COVID-19

With the sudden appearance of COVID-19, many businesses encounter tough and violent challenges as shut down with a loss of revenue and removal of production capacity. The preservation of the EBIT and especially the cash is critical. Therefore companies should focus on completing their 2019 tax credits on R&D might help to obtain cash refunds from the governments. As part of the various public states measures, urgent tax incentives have been introduced such as: Such measures may lead several countries to raise their tax rates and tax conditions in the coming years. The world post COVID-19 remains uncertain and companies may rethink their value chain process by using tax design to improve their bottom line results. Opportunities 1. Transfer pricing activity reorganization In context of an economic downturn, tax-group reorganization is more favourable as it triggers lower valuation in respect of transfer of business activities, goodwill, Intellectual Property (IP). Restructuring allows to benefit from the negative context to redesign the transfer pricing group policy by calibrating the benchmarks and efficiently re-streamline the generation of the value added creation in more tax efficient locations. In addition, tax losses generated during 2020 might be optimally utilized to reduce the exit tax impact. 2. Revisit of existing transfer pricing flows The negative economic context offers possibilities to recalibrate the transfer pricing remuneration by streamlining the benchmarks. This may decrease the net income of the group subject to corporate tax in the various jurisdictions. 3. CFC – Controlled Foreign Company rules. Group subject to CFC rules may also benefit from a favourable re-design in term of shareholding. Reorganizing the shareholding flows as well as the adequate level of substance might allow to minimize and optimize the negative impact of these rules. As a conclusion, the world post COVID-19, remains uncertain and companies may take this opportunity to rethink their value chain process by using tax design to improve their bottom line results. It is the right to elaborate a tax risk-benefit assessment. Please feel free to contact us for more information. Simon Massel