When good structures fail: The missing piece in international tax planning

In practice, we often see well-designed setups, holding companies, service entities, and financing flows that are technically sound, and, at some point, made perfect sense. The issue is not the structure itself, but what happens after it is implemented, as operations evolve, people move, decisions are made informally, and documentation becomes outdated, gradually causing the structure to drift away from reality.

What was once aligned becomes fragmented; what was once clear becomes difficult to articulate, even internally. Over time, the structure stops reflecting how the business actually operates, yet it continues to function as if nothing had changed.

Until someone asks a simple question: “Why does this entity earn what it earns?”

At that moment, the problem is no longer technical; it becomes narrative.

Tax authorities today are not just reviewing structures – they are testing whether the story behind them holds together who is really making decisions, where value is created, and why profits are allocated the way they are. More importantly, they are determining if all of this can be demonstrated consistently across jurisdictions and over time.

A common situation illustrates this well: a company operating across multiple jurisdictions, with a central entity invoicing key services. On paper, everything is supported, but in practice, decisions are taken elsewhere, functions are shared informally, and no one has revisited the structure in years. Local teams adapt, management evolves, and the original rationale becomes increasingly distant from day-to-day operations.

There is no single “mistake”, just a gradual disconnects and this is where many structures fail, not in their design, but in their ability to be explained, supported, and defended over time.

Increasingly, we see that the challenge is not identifying risks, but evidencing coherence. Files exist, reports exist, and contracts exist, but they do not always tell the same story. In an audit environment, inconsistencies matter more than intentions.

The implication is simple but often overlooked: international tax planning is no longer a one-time exercise. It requires continuous alignment between structure, operations, and documentation, supported by clear governance and periodic reassessment.

The most effective structures today are not the most sophisticated ones, but those that remain clear, coherent, and easy to explain even years later, even under scrutiny, and even to someone who was not involved in their original design.

In the end, a structure that cannot be understood cannot be defended.

The difference today is not between aggressive and conservative planning; it is between structures that can be sustained and those that will eventually be challenged. This is where experienced, integrated advice becomes critical, not only at the design stage, but throughout the life of the structure.

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Prof Sergio Guerrero Rosas, Managing Director at Guerrero y Santana, has over 25 years’ experience advising companies from SMEs to multinationals, as well as individuals, on tax and estate planning. He is also Global Vice Chair of the GGI Trust & Estate Planning (TEP) Practice Group.