Tax due diligence is often left out when planning to sell an enterprise. However the results of tax due diligence may be crucial to the success of a deal.

A thorough examination of tax laws and regulations can reveal potential issues that could cause a breach before they become problems. They can range from the fundamental complexity of a company’s tax situation to the nuances of international compliance.

The tax due diligence process is also an opportunity to determine vdr secrets whether a company is likely to create tax-exempt presence in other nations. For example, an office in a foreign jurisdiction can cause local country taxes on excise and income even though a treaty between the US and the foreign jurisdiction might mitigate this impact, it’s important to recognize the tax risk and opportunities proactively.

We evaluate the proposed transaction, the company’s acquisition and disposal practices in the past, and look into any international compliance issues. (Including FBAR filings) As part of our tax due diligence process, we also analyze the transfer pricing documentation as well as the company’s document describing the transfer price. This includes analyzing assets and liabilities’ underlying tax basis and identifying tax attributes that could be utilized to maximize the value.

For instance, a business’s tax deductions could exceed its tax-deductible income, leading to net operating losses (NOLs). Due diligence can help to determine the extent to which these NOLs are realizable, and also if they can be transferred to the new owner as an offset or used to lower tax liability following the sale. Unclaimed property compliance is another tax due diligence item. While it isn’t a topic of tax, state tax authorities are becoming more scrutinized in this field.