Tax due diligence is often left out when planning for the sale of an enterprise. However the results of tax due diligence may be vital to the success of any transaction.

A thorough review of tax laws and regulations can reveal potential issues that could cause a deal to fail before they become a serious issue. They can range from the fundamental complexity of a company’s tax situation to the specifics of international compliance.

Tax due diligence also looks at whether a business can establish a an international tax-paying entity. For instance, a place of business in a different country can create local income and excise taxes, and even though there’s a treaty between US and the foreign jurisdiction could reduce the effects, it’s vital to recognize the tax risk and opportunities proactively.

As part of the tax due diligence process we review the proposed transaction and the company’s historical disposal and acquisition 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 could be used to maximize value.

For instance, a company’s tax deductions might be greater than its income tax deductible, which results in net operating losses (NOLs). Due diligence can help to determine whether these https://allywifismart.com/why-secure-dataroom-is-your-way-to-success/ NOLs are realizable and also whether they are transferable to the new owner as an option to carry forward or lower tax liability following the sale. Unclaimed property compliance is another tax due diligence issue. Although it is not a specific tax issue, state tax authorities are being scrutinized more in this regard.