Tax due diligence is often omitted when preparing for the sale of the business. However the results of tax due diligence can be crucial to the success of a sale.
A thorough analysis of tax laws and regulations can identify potential deal-breaking issues well before they become a major issue. This can range from the complexity of the financial position of a company to the nuances of international compliance.
Tax due diligence also looks at whether a business can establish a an taxable presence in another country. For example, an office in a different country can cause local country taxation on income and excise however, despite the fact that a treaty between the US and the foreign jurisdiction could reduce this impact, it’s important to know the tax risks and opportunities proactively.
As part of the tax due diligence process We analyze the planned transaction and the company’s past acquisition and disposition activities and also review the company’s transfer pricing documentation and any international compliance issues (including FBAR filings). This includes analyzing the underlying tax basis of liabilities and assets and identifying tax attributes that can be used to increase the value.
For instance, a company’s tax deductions might be greater than its taxable income, resulting in net operating losses (NOLs). Due diligence can be used to determine if the NOLs can be realized and whether they can either be transferred to the new owner as a tax carryforward or used to reduce tax https://allywifismart.com/ liabilities after a sale. Other tax due diligence issues include unclaimed property compliance – which, while not specifically a tax subject is now becoming a subject of increasing scrutiny by tax authorities of the state.