When it comes to making preparations for a business sale tax due diligence might seem like a last-minute thought. However, the results of tax due diligence can be vital to the success of any transaction.
A thorough study of tax laws and regulations can help identify potential deal-breaking issues prior to they become a problem. It could be anything from the fundamental complexity of the financial position of a company to the nuances of international compliance.
Tax due diligence also considers the possibility of a business creating a taxable presence abroad. A foreign office, for instance could trigger local excise and income tax. While a treaty may mitigate the effects, it is vital to be prepared and fully understand the risks and opportunities.
As part of the tax due diligence process We analyze the planned transaction and the company’s historical disposal and acquisition activities as well as look over the documentation for transfer pricing and any international compliance issues (including FBAR filings). This includes assessing the underlying tax basis of assets and liabilities and identifying tax attributes that can be used to boost the value.
Net operating losses (NOLs) may occur when the deductions of a business exceed its taxable income. Due diligence can be used to determine if these losses can be realized and whether they can either be transferred to an owner who is a tax carryforward or used to reduce the tax burden after a sale. Unclaimed property compliance is yet another tax due diligence issue. While it isn’t Paperless board meetings a tax subject taxes, tax authorities in states are increasingly scrutinized in this field.