Global Value Chains and the Separate-Entity Principle: Rethinking Intra-Group Relationships in Corporate Law and International Tax Law

Why It Matters

The tension between legal formalism and GVC economics affects how risks, responsibilities, and taxes are allocated, influencing corporate governance and public revenue worldwide.

Key Takeaways

• GVCs blur lines between legal entities and economic reality.
• Corporate law still prioritizes entity‑by‑entity liability.
• International tax reforms embed group‑level reporting and minimum tax.
• Veil‑piercing remains rare, limiting group responsibility.

Pulse Analysis

The rise of global value chains has transformed production into a tightly coordinated network that spans continents. A single product may be designed in the United States, manufactured in Southeast Asia, branded in Europe, and sold worldwide. This economic interdependence strains the separate‑entity principle, which traditionally isolates each corporate subsidiary as an independent legal person for liability and tax purposes. As firms operate more like a single economic organism, regulators are forced to reconsider whether existing legal constructs adequately capture the true nature of multinational activity.

Corporate law across major jurisdictions still anchors responsibility at the individual company level. In Germany, the Konzernrecht offers a limited framework for group structures, while the Netherlands and the United Kingdom rely on case‑by‑case doctrines such as veil‑piercing to address abuse. Directors’ duties remain owed to their own entity, even when strategic decisions are dictated by a parent. Consequently, group‑wide accountability is rare, and risk allocation continues to be assessed on a per‑entity basis, leaving a gap between legal theory and the integrated reality of GVCs.

International tax law is moving faster toward a group perspective. The BEPS‑driven Country‑by‑Country Reporting requirement forces multinationals to disclose revenue, profit, and tax data for each jurisdiction, exposing the underlying GVC architecture. Pillar Two’s global minimum tax further erodes the arm‑length paradigm by calculating effective tax rates at the jurisdictional level and allowing top‑up taxes to be collected by the ultimate parent. These reforms signal a shift toward treating multinational enterprises as cohesive economic units, prompting a broader debate on how corporate and tax law should adapt to the complexities of modern supply chains.