Tax Due Diligence – Tax Due Diligence Is Crucial to the Success of a Business Sale
Tax due diligence is often left out when making preparations for the sale of a business. Tax due diligence results can be critical to the https://allywifismart.com/data-room-and-its-support-for-modern-businesses/ success or failure of a business deal.
A rigorous review of tax laws and regulations could reveal issues that could be a deal-breaker before they become an issue. They can range from the basic complexity of a business’s tax situation to the specifics of international compliance.
Tax due diligence also considers whether a company can create an overseas tax-paying presence. For instance, a place of business in a foreign country could result in local country taxation of excise and income taxes and, even though an agreement between the US and the foreign jurisdiction could reduce this impact, it’s important to be aware of tax risks and opportunities.
As part of the tax due diligence process we review the proposed transaction and the company’s historical disposal and acquisition activities as well as look over the company’s documentation on transfer pricing and any international compliance issues (including FBAR filings). This includes assessing the tax basis of assets and liabilities and identifying any tax attributes that could be used to enhance the value.
Net operating losses (NOLs) may occur when a company’s deductions exceed its tax-deductible income. Due diligence can help to determine whether these NOLs can be recouped, and also whether they could be transferred to the new owner as a carryforward or used to reduce tax liabilities following the sale. Unclaimed property compliance is another tax due diligence item. While it isn’t a subject of taxation taxes, tax authorities in states are becoming more scrutinized in this regard.