When you are planning for a business sale tax due diligence might appear to be an afterthought. Tax due diligence results can be critical to the success or failure of a business deal.
A thorough review of tax laws and regulations can identify potential deal-breaking issues well before they become a serious issue. This could range from the fundamental complexity of a company’s financial situation to the nuances involved with international compliance.
The tax due diligence process also focuses on whether a company is likely to create taxable presence in other countries. For instance, a place of business in a foreign jurisdiction can create local taxes on excise and income, and even though an agreement between the US and the foreign jurisdiction may mitigate this impact, it’s important to be aware of tax risks and opportunities proactively.
As part of the tax due diligence workstream we look at the prospective transaction and the company’s historical acquisition and disposition activities and review the company’s documentation on transfer pricing and any international compliance issues (including FBAR filings). This includes assessing the assets and liabilities‘ tax basis and identifying tax attributes that can be utilized to maximize the value.
Net operating losses (NOLs) can result when a company’s deductions are greater than its tax-deductible income. Due diligence can help determine whether these NOLs are feasible, and also if they can be transferred to the new owner as a carryforward or used to reduce tax burdens following the sale. Other tax due diligence items include unclaimed property compliance – which, although not a specific tax issue is https://allywifismart.com/a-comprehensive-list-of-vdr-software-providers/ now becoming a subject that is being scrutinized by tax authorities in the state.
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