By Michael Rapoport

PricewaterhouseCoopers and General Electric Co. have agreed to move GE's in-house global tax team over to PwC as the accounting firm adds global expertise and the industrial conglomerate continues slimming down.

PWC will absorb more than 600 employees under the agreement announced Thursday. GE's tax employees in 42 countries will move to PwC, where they will provide tax planning, advice, compliance and other tax services to both GE and other PwC tax clients.

PwC will also take over GE's tax technologies as part of the five-year renewable agreement.

The unusual deal isn't an acquisition, and no money is changing hands. PwC expects to benefit from the agreement by enhancing its operations globally. The firm already has 41,000 global tax professionals, so adding the GE workers would increase the total by only about 1.5%.

PwC's tax business had $9.1 billion in revenue in fiscal 2016. The GE unit, known as Global Enterprise Tax Solutions, could in time bring in more than $1 billion in a year in revenue to PwC from GE and other clients, said Mark Mendola, PwC's vice chairman and U.S. managing partner.

With tax rules changing around the world, and the "great relationships" that GE's tax professionals have with policy makers in Washington, Brussels and elsewhere, "we think it's a great opportunity," Mr. Mendola said in an interview.

GE, meanwhile, expects to benefit by lowering its fixed costs and simplifying its organization. GE's tax operation is far-ranging, as the company files more than 5,500 income tax returns a year in more than 300 jurisdictions world-wide, according to GE's annual report. Shedding the operation is in line with GE's push to simplify and streamline itself. The company has cut costs and moved to sell most of its GE Capital assets in recent years.

The agreement with PwC allows GE "the flexibility to scale to the requirements of the changing GE portfolio" even as it provides the company continued access to the work of its tax professionals, said Mike Gosk, GE's senior tax counsel. GE is audited by a different accounting firm, KPMG.

The deal could be a forerunner of other similar agreements. In a post on the Medium content-sharing platform, Mr. Mendola wrote that other PwC clients "are contemplating the benefits of following the GE model of building an external platform that services all their tax needs."

In fact, he wrote, the same model could work just as well in such areas as internal audit or data processing. "Weincreasingly see clients that want more flexibility in managing their staff," he wrote.

PwC and GE have been discussing an alliance for more than a year, Mr. Mendola said. With corporate tax changes in the offing in the U.S. and the pressures on companies globally to cut costs, PwC and GE thought that "wouldn't it be cool to do something together," he said.

The two companies already have ties. Last September, PwC and GE announced an alliance to help industrial clients apply digital technology. Jan Hauser, GE's controller and chief accounting officer, is a former PwC partner.

The GE employees joining PwC, a mix of accountants, lawyers and other tax professionals, come from both GE's corporate division and the company's businesses, including GE Capital. About 20 corporate tax employees will remain at GE, focused on managing the PwC relationship among other matters. Another 250 tax employees will remain to provide tax services inGE's individual business units.

PwC, which is a global network of private partnerships, anticipates that some of the new employees will be made PwC partners, though it's still not clear how many.

Write to Michael Rapoport at Michael.Rapoport@wsj.com

(END) Dow Jones Newswires

January 12, 2017 19:35 ET (00:35 GMT)

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