Tax due diligence is often overlooked when preparing for the sale of the business. However, the results of tax due diligence could be vital to the success of any transaction.
A rigorous review of tax regulations and rules could read post here allywifismart.com reveal issues that could be a deal-breaker before they become a problem. These can be anything from the basic complexity of a company’s tax situation to the nuances of international compliance.
The tax due diligence process also examines whether a company is likely to create tax-paying presence in other countries. A foreign office, for example could trigger local taxes on income and excise. Even though treaties can mitigate the impact, it is important to be proactive and understand the risks and opportunities.
As part of the tax due diligence process, we analyze the contemplated transaction and the company’s historical disposal and acquisition activities as well as look over the documentation for transfer pricing and any international compliance issues (including FBAR filings). This includes analyzing the underlying tax basis of assets and liabilities and identifying tax attributes that could be used to increase the value.
Net operating losses (NOLs) are a result of when a company’s deductions are greater than its tax-deductible income. Due diligence can help to determine if these NOLs are realizable, and also whether they are transferable to the new owner as an offset or used to reduce tax liability after the sale. Unclaimed property compliance is yet another tax due diligence issue. While not strictly a tax issue, state tax authorities are becoming more scrutinized in this area.
