MEDIATION OF CONTRACT SPLITS AND TAX RISK REDUCTION IN THE RELATIONSHIP BETWEEN ROLE OF EXTERNAL TAX COUNSEL AND CONTRACT STRUCTURE COMMON IN EPC CONTRACTS DESIGN -A STUDY

Abstract

Past research, judicial decisions, and industry practices all point to a positive correlation between contract splitting and tax risk reduction, as well as between the involvement of outside counsel and the typical contract structure found in EPC contracts and the interdependencies between the many components that make up these types of agreements. Based on previous research, BEPS -7 has included measures to discourage the arbitrary fragmentation of contracts in order to reduce tax risk. Corporates sometimes find themselves compelled to divide contracts into two or more portions due to various circumstances. Considerations include tax preparation, minimization of tax liabilities, efficient company governance, and the function of outside tax counsel in contract dissolution. In addition, the corporates' legal teams assist them, and the recommendations of external tax experts are considered in the creation of all such contracts. This research looks at how the help of outside counsel in structuring contracts and contract splits affect tax risk minimization. The authors conducted the analysis using a questionnaire approach and applied PLS-SEM to the responses. They found that tax risk reduction on contracts is influenced by contract splitting and that external tax counsel influences the pattern of contract structure. These factors also contribute to the fact that corporations often use split contracts in EPC projects and seek advice from outside tax experts when deciding how to structure these contracts.