In the world of alternative investments, tax structuring often attracts most of the attention. It is through structuring that the architecture is designed, flows are optimized, and expected returns are secured. However, beyond setting up this framework, it is equally critical to ensure rigorous operational monitoring of processes and events with tax implications.
Implementation: an underestimated challenge
“Tax compliance is sometimes seen as something rather accounting and administrative. The function does not always receive the attention it deserves,” observes Armin Weber - Direct Tax Compliance Director at BDO. Yet, while structuring lays the foundations, it is implementation, year after year, that ultimately determines the success of a structure.
For BDO experts, structuring and implementation cannot be separated. “Like any journey into space, launching the rocket is crucial, but expertise is needed to support its long trajectory and reach the intended destination,” he continues. Continuous tax monitoring aims precisely to ensure that the trajectory remains aligned with the initial plan.
Ensuring consistency over time
Alternative investments operate over long horizons, typically around seven years. “Weaknesses related to a given structuring often only emerge after several years,” explains Nicolas Devillers - Indirect Tax Partner at BDO. This makes rigorous monitoring essential to continuously adjust the framework.
During this period, parameters evolve. Legislation changes, tax treaties shift, and rules become stricter. On top of that come economic uncertainties and varying asset performance. “Between the structuring phase and exit, a lot can happen,” he notes. A structure designed in a given context must therefore continue to function in a constantly changing environment.
Integrating new variables
The risks are real and often underestimated. A misclassified transaction, incomplete reporting, or a divergence in the interpretation of a tax treatment—these situations can go unnoticed for years before being revealed during a tax audit, which may occur up to five years later.
At liquidation, it may turn out that a significant amount should have been paid much earlier
And this is precisely where the most sophisticated structures reveal their vulnerabilities.
In terms of VAT, in particular, the stakes are especially high. Between limitations on input VAT recovery, differences in interpretation, and varying practices across jurisdictions, the risk of discrepancies is significant. Incorrect allocation or inconsistent treatment can lead to substantial adjustments several years later.
Managing and monitoring flows
The inherent complexity of these structures only strengthens these challenges. Contrary to common belief, a fund is never a single entity. “It is a combination of multiple entities,” explains Armin Weber. Chains of companies, sometimes across several layers, are combined with parallel structures for each investment.
Within this framework, everything depends on the proper management of flows and their overall consistency. “A simple mistake, such as an invoice issued to the wrong entity or an incorrect VAT number, can trigger questions from tax authorities,” notes Nicolas Devillers. In an international environment, where each country applies its own rules, constant awareness is required.
Transparency, security, and efficiency
Client expectations reflect this complexity. “The players we support are looking for both transparency and certainty,” summarizes Nicolas Devillers. But beyond these fundamentals, there is another key requirement: operational efficiency.
Some structures must handle particularly high volumes, with up to 200 filings per month. In this context, tax compliance goes far beyond simply producing returns.
Our role is not just to put numbers into boxes, but to ensure that the structure runs properly over time.
Having a comprehensive overview
This mission relies on a deep understanding of the structures, their logic, and their objectives. Over time, teams develop a global view that allows them to anticipate cascading effects. “After a certain time, we are familiar with the structure. We know where the key features are and what the implications of a change might be,” he adds.
This ability to anticipate is essential in environments where every adjustment can have multi-level consequences. It also enables proactive client support by providing solutions tailored to evolving situations. “The goal is to allow clients to focus on their core business,” says Nicolas Devillers.
Combining human expertise and technology
In this context, digital tools are playing an increasing role. Automation, data standardization, and artificial intelligence are significantly improving process efficiency.
“In the past, we relied on robots thanks to automation. Now, with artificial intelligence, we almost have a virtual colleague by our side, capable of understanding and interpreting certain information in real time. There remains, however, a need for experts to validate both the accuracy of technical positions and their consistency with the initial structuring” observes Nicolas Devillers.
These technologies offer undeniable benefits, but they rely on one essential condition: data quality. “Everything is based on correct classification from the outset,” he emphasizes. An initial error will mechanically propagate throughout the entire process.
Technology accelerates processing, but it does not replace analysis. Human expertise remains essential to review, interpret, and validate the information produced — especially as tax authorities themselves are strengthening their audit capabilities through automation and real-time reporting.
Ensuring continuity and compliance
The role of a partner like BDO is to ensure the continuity and compliance of an investment structure’s operations. Understanding it, supporting its evolution, anticipating risks, and delivering practical solutions — at a time when the environment is becoming increasingly complex — is more crucial than ever.