Tax Strategy Assessment

Purpose

This assessment evaluates the maturity of an organization's tax strategy across five dimensions: entity structure and tax planning, transfer pricing, tax credits and incentives, compliance and reporting, and Pillar Two / international tax readiness. The output identifies where tax value is left on the table and compliance risks exist. [src2]

Constraints

• Requires tax returns (3 years), entity docs, TP documentation, and provision workpapers
• Not meaningful for single-jurisdiction companies under $5M revenue
• Should involve VP Tax, CFO, and external advisors for complex structures
• Diagnostic only — does not constitute tax advice; validate with qualified professionals
• Tax law changes frequently — benchmarks valid as of March 2026; verify current law

Assessment Dimensions

Dimension 1: Entity Structure and Tax Planning

What this measures: How strategically the entity structure is designed for tax optimization while maintaining compliance.

Red flags: Structure not reviewed in 3+ years; no jurisdiction rationale; missing intercompany agreements. [src2]

Quick diagnostic question: "When was your entity structure last reviewed for tax efficiency?"

Dimension 2: Transfer Pricing

What this measures: How effectively intercompany pricing complies with arm's length while optimizing tax position.

Red flags: No TP docs despite material intercompany transactions; same markup for all; no CbCR above threshold. [src3]

Quick diagnostic question: "Do you have a TP policy, and when were benchmarking studies last updated?"

Dimension 3: Tax Credits and Incentives

What this measures: How effectively the organization captures available credits — R&D credits, investment incentives, jurisdiction-specific programs.

Red flags: Eligible activities unclaimed; no contemporaneous docs; Section 174 not addressed post-OBBBA; Form 6765 Section G not prepared. [src1]

Quick diagnostic question: "Do you claim R&D credits with project-level documentation?"

Dimension 4: Compliance and Reporting

What this measures: How effectively the organization meets filing obligations, manages provision, and maintains audit readiness.

Red flags: Extensions by necessity; annual-only provision; cannot produce supporting docs; frequent prior-period adjustments. [src4]

Quick diagnostic question: "Is your provision quarterly, and can you document top 5 tax positions within a week?"

Dimension 5: Pillar Two and International Tax Readiness

What this measures: Preparedness for OECD Pillar Two global minimum tax and evolving international requirements.

Red flags: Revenue >EUR 750M with no assessment; safe harbour used without ETR validation; no data collection; unaware of 2026 SbS changes. [src5]

Quick diagnostic question: "Have you completed a Pillar Two scoping assessment?"

Scoring & Interpretation

Overall Score Calculation

Overall Score = (Entity Structure + Transfer Pricing + Credits & Incentives + Compliance + Pillar Two) / 5

Score Interpretation

Dimension-Level Action Routing

Benchmarks by Segment

Common Pitfalls in Assessment

• Confusing compliance with strategy: Filing on time is compliance, not strategy. Mature tax functions proactively optimize.
• R&D credit underclaiming: Many companies miss credits or lack project-level documentation. OBBBA changes create new opportunities and requirements.
• Pillar Two procrastination: Organizations assume it does not apply or rely on safe harbours without validation.
• TP as afterthought: Documentation created retroactively creates audit risk and misses optimization.

When This Matters

Fetch when evaluating tax strategy, optimizing entity structure, assessing R&D credit programs, preparing for Pillar Two, or benchmarking tax function maturity. Critical during international expansion, M&A, and annual tax planning.