Tax due diligence is often omitted when planning for the sale of an enterprise. Tax due diligence results can be critical to the success or failure of a business transaction.
A thorough achieving success with secure digital rooms review of tax regulations and tax rules could reveal issues that could be a deal-breaker before they become an issue. They could range from the fundamental complexity of a company’s tax position to the nuances of international compliance.
Tax due diligence is also a way to determine whether a business can establish a taxable presence abroad. For example, an office in a foreign country could trigger local country taxes on excise and income and, even though there’s a treaty between US and the foreign jurisdiction might mitigate this impact, it’s important to be aware of tax risks and opportunities.
We review the proposed transaction, the company’s acquisition and disposal activities in the past, as well as review any international compliance issues. (Including FBAR filings) As part of our tax due diligence program, we also review the transfer pricing documentation along with the company’s documents relating to the transfer price. This includes analyzing the underlying tax basis of assets and liabilities and identifying any tax attributes that could be used to increase the value.
Net operating losses (NOLs) may occur when the deductions of a business exceed its tax-deductible income. Due diligence can be used to determine if the NOLs can be realized, and if they can either be transferred to a new owner as tax carryforwards or utilized to reduce the tax burden following the sale. Other tax due diligence issues include unclaimed property compliance – that, though not specifically a tax subject is becoming a subject that is being scrutinized by state tax authorities.