Tax Due Diligence – Tax Due Diligence Is Crucial to the Success of a Business Sale

Tax due diligence is often overlooked when planning to sell the business. Tax due diligence results can be crucial to the success or failure of a business transaction.

A thorough examination https://allywifismart.com/what-are-the-most-secure-virtual-data-room-solutions-in-the-market/ of tax laws and regulations can reveal potential deal-breaking issues well before they become a real problem. This could range from the fundamental complexity of a company’s financial situation to the nuances of international compliance.

Tax due diligence also looks at whether a company can create an taxable presence in another country. For example, an office 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 might mitigate the effects, it’s vital to know the tax risks and opportunities proactively.

We evaluate the proposed transaction, the company’s acquisition and disposal activities in the past, and also review any international compliance issues. (Including FBAR filings) As part of our tax due diligence process we also look over the transfer pricing documentation as well as the company’s transfer price documentation. This includes analyzing the underlying tax basis of liabilities and assets and identifying tax-related attributes that could be used to boost the value.

Net operating losses (NOLs) may occur when a company’s deductions are greater than its taxable income. Due diligence can be used to determine if these losses can be realized and if they are transferable to the new owner in the form of tax-free carryforwards or used to reduce tax burdens following the sale. Unclaimed property compliance is a different tax due diligence item. Although it is not a specific tax subject however, state tax authorities are being scrutinized more in this regard.