When it comes to the preparation for a sale of a business tax due diligence might appear to be an afterthought. However the results of tax due diligence may be vital to the success of a sale.
A thorough review of tax laws and regulations can uncover potential deal-breaking issues well before they become a real problem. This could be anything from the basic complexity of a company’s tax position to the nuances of international compliance.
The tax due diligence process also considers whether a company is likely to create taxable presence in other countries. For instance, a business in a different country can create local taxation on income and excise even though an agreement between the US and the foreign jurisdiction might mitigate the effects, it’s vital to be aware of tax risks and opportunities.
We review the proposed transaction, the company’s acquisition and disposal actions in the past, and also review any international compliance issues. (Including FBAR filings) As part of our tax due diligence program, we also review the transfer pricing documentation as well as the company’s document describing the transfer price. This includes assessing the assets and liabilities’ tax basis and identifying tax attributes that could be used to increase the value.
Net operating losses (NOLs) can occur when a company’s deductions are greater than its tax-deductible income. Due diligence can help to determine if the NOLs can be realized and also whether they could be transferred to the new owner as a carryforward or used to lower tax liability following the sale. Unclaimed property compliance is yet another tax due diligence item. While it isn’t a tax issue however, state tax authorities https://allywifismart.com/data-room-and-its-support-for-modern-businesses/ are increasingly scrutinized in this area.