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Medtronic the Latest Company to Propose Tax Inversion
Author: Scarinci Hollenbeck, LLC
Date: June 25, 2014
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Yet another U.S. health care company is set to take part in a corporate inversion, in which a U.S.-based firm merges with a foreign companyin order to take advantage of lower tax rates abroad.
Medtronic Inc. is set to become the largest company ye to perform a tax inversion with its plans to merge with former-U.S. company Covidien Plc., which has been incorporated in Ireland since 2009, according to Bloomberg. Both companies are multinational medical device producers with headquarters in the U.S., with Medtronic operating out of Minneapolis and Covidien, a former subsidiary of Tycho, operating out of Mansfield, Massachusetts.
“This is not about lowering tax rates,” said Medtronic CEO Omar Ishrak in an interview, according to the news source. “What we will have is access to the cash generated outside the U.S. We’ll use that to invest much more aggressively in the U.S.”
Ishrak is referring to the $20.5 billion of untaxed earnings that the company holds in offshore subsidiaries, Robert Willens, an independent tax consultant, explained to Bloomberg. The U.S. tax law requires that multinationals pay taxes on money earned abroad when they return it to the U.S. By incorporating in Ireland via a merger with Covidien, the company could freely use this money without triggering U.S. taxes.
Medtronic isn’t just attempting to lower its taxes though – a merger with Covidien would help to make it an all-inclusive supplier for hospitals worldwide, according to The Wall Street Journal. Medtronic is one of the world’s largest suppliers of heart and spinal implants, and is expanding aggressively into the hospital-services industry. Covidien specializes in surgical operating tools and devices. By merging, the companies would have a significantly broader range of offerings, which could prompt more hospitals to do the majority of their business with the company.
If you have any questions about this post or would like to discuss your company’s tax,trust, and estate matters , please contact me, Frank L. Brunetti at ScarinciHollenbeck.com.
- Practices: Tax and Trusts & Estates, International Law & Trade
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