Global Capability Centers in 2025: Key Legal and Strategic Considerations

As a result of an abundance of talent, established infrastructure, and the support of the national government and local governments, India has been the principal hub for GCC activity. However, other countries, such as Malaysia, the Philippines, Poland, Costa Rica and Colombia, are offering competitive tax and regulatory incentives, training grants and infrastructure subsidies to attract new GCCs. Organizations are increasingly adopting multilocation strategies to diversify risk, secure around-the-clock operations and capitalize on the unique advantages each jurisdiction can offer.

The recent introduction of tariffs by the Trump administration has also resulted in a shift in the strategic use of GCCs. Although the tariff regimes have not targeted GCCs directly (to date), GCCs may help organizations to better navigate the resulting economic uncertainty, optimize costs and digitize operations.

As GCCs continue their global expansion, organizations must consider an increasingly complex legal environment spanning data privacy, tax and tariff regimes, regulatory compliance, intellectual property (IP) protection, labor laws and real estate structures. This article explores key considerations for setting up or scaling a globally integrated GCC model in 2025 and provides guidance on managing legal risk in a cross-border environment.

The Evolution of GCCs and Their Global Reach
Over the last two decades, GCCs have evolved far beyond cost-saving mechanisms. They now serve as innovation hubs and drive strategic transformation across industries. By establishing in-house centers of excellence, organizations maintain greater control over proprietary technology and IP, streamline decision-making, and foster a collaborative culture that is much more difficult to achieve through traditional models of outsourcing managed services to third-party service providers.

In addition to conventional IT and back-office support, GCCs have taken on more specialized and critical functions, including:

• Data Analytics and AI. Scaling advanced analytics, machine learning and AI capabilities that serve a range of initiatives from fraud prevention to product development to customer experience.
• ESG (Environmental, Social and Governance). Managing data analytics, monitoring sustainability metrics, and helping parent entities meet evolving compliance expectations around decarbonization and governance.
• M&A Support. Overseeing organizational design, process coordination, technology consolidation and integration planning.
• Enterprise Functions. Centralizing HR, legal, risk, compliance, reporting and administrative support for multiple business units.

By consolidating such functions within a well-managed GCC, organizations can more readily benchmark performance against external providers, drive continuous improvement and accelerate innovation.

Key Legal and Regulatory Considerations

Data Protection and Cross-Border Transfers
GCCs typically handle sensitive and business-critical information, including personal data of consumers, making data protection a paramount consideration. Sharing data across multiple jurisdictions creates further risks and compliance challenges with data protection laws. The regulatory landscape extends well beyond the EU’s well-known General Data Protection Regulation (GDPR). The United States, for example, has a patchwork of state-level privacy laws—such as the California Privacy Rights Act (CPRA) and similar frameworks in Colorado, Virginia, Connecticut and Utah. Host countries for GCCs have also implemented or updated broad privacy laws (e.g., India’s Digital Personal Data Protection Law and Brazil’s LGPD).

Further, certain industries impose their own set of regulations. For instance, GCCs supporting health care organizations will face different data handling and reporting obligations than GCCs supporting the financial sector. These specialized requirements underscore the importance of a targeted, yet balanced, compliance strategy—particularly for multinational operations where regulations overlap or conflict.

Structuring the Legal Entity
Establishing a legal entity for a GCC—whether in India, Poland, Costa Rica or elsewhere—has far-reaching implications for risk allocation, compliance and cost efficiency. Common entity types include wholly owned subsidiaries, branches, private corporations and limited liability partnerships.

Each jurisdiction may impose local board composition requirements, foreign direct investment restrictions and specific statutory filings. Noncompliance can lead to fines, operational disruption and reputational harm. Although India has a well-developed regulatory regime, other regions are quickly adopting their own rules and regulations to remain competitive. As a result, the choice of entity structure is no longer a simple question of operational convenience but a complex calculus involving local labor laws, tax incentives, intellectual property protections and corporate governance.

Tax and Tariff Implications
Tax incentives are a major draw for companies establishing GCCs. Jurisdictions worldwide offer competitive corporate income tax rates, holidays, training grants and other incentives aimed at luring foreign direct investment. For example, India has established special export zones, Malaysia has introduced a 10% tax rate for high-tech GCCs, Costa Rica provides training grants, and Colombia offers infrastructure subsidies.

Transfer pricing regulations aim to prevent multinational companies from allocating profits to lower-tax jurisdictions in ways that do not reflect the actual economic activity. GCCs frequently involve intercompany transactions—such as the parent entity paying the GCC for services, technology licensing or royalty arrangements—and these transactions must be benchmarked at arm’s length.

More recently, the Trump administration’s global tariff push has made the landscape more complex and unpredictable. Tariffs have prompted companies to diversify away from China, leading to increased demand for support from GCCs in supply chain modeling, vendor management and procurement analytics. On the other hand, the pressure to bring back activities might reduce demand for offshore GCC services or prompt a hybrid model. Facing tariff-related uncertainty, organizations will likely lean more heavily on automation, AI and digital solutions, often driven by GCCs.

Intellectual Property Protection and Innovation Management
GCCs frequently engage in activities that produce valuable intellectual property. Ensuring that all IP rights remain with the parent company should be a top priority. This can be accomplished through clear IP ownership clauses in employment contracts, vendor agreements and any joint venture arrangements.

GCCs engaged in cutting-edge R&D—such as AI, pharmaceutical development, new financial products or semiconductor design—should take steps to safeguard patents, trade secrets and proprietary algorithms. Conducting regular IP audits ensures that licensing terms, patent registrations and trade secret protections stay current with the GCC’s evolving activities and regulatory requirements. Through these strategies, organizations not only secure their intangible assets but also create an environment that fosters innovation without risking inadvertent IP loss.

Real Estate Considerations
An often-overlooked issue for GCCs pertains to the nature of the physical space they occupy. In some jurisdictions, rather than offering a traditional real property lease, property owners or service providers may issue a license for use of the premises, or bundle office space with a broader set of managed services. Understanding the implications of each model is critical.

Each model presents distinct issues regarding liability, insurance, maintenance obligations and privacy. Additionally, local laws vary widely. Some jurisdictions heavily regulate commercial leases, while licenses and service agreements might be subject to different or less stringent rules. When negotiating these contracts, companies must consider how they align with broader business continuity plans, data security protocols, and potential expansion or contraction needs.

Conclusion
In 2025, Global Capability Centers have transcended the role of mere cost-saving engines to become linchpins of enterprise-wide innovation, analytics and strategic transformation. While India remains a critical hub, countries across Eastern Europe, Southeast Asia and Latin America are capturing an increasing share of new GCC investments, with each jurisdiction offering its own ecosystem of incentives, talent pools and regulatory frameworks.

Setting up or expanding a GCC involves more than selecting a cost-effective labor market; it requires an integrated approach that accounts for data privacy, tax implications, entity structuring, IP protection, industry-specific regulations and even nuanced real estate considerations. Crucially, risk allocation and responsibilities can vary significantly from one jurisdiction to another—further emphasizing the need for a carefully tailored and proactive legal strategy.

For further guidance on structuring, protecting or expanding your GCC please reach out to your regular Pillsbury contact or the authors of this client alert.