When you are making preparations for a business sale tax due diligence can appear to be an afterthought. Tax due diligence results can be critical to the success or failure of a business deal.
A thorough examination of tax regulations and tax rules can identify potentially deal-breaking issues before they become an issue. This can range from the basic complexity of the financial position of a company to the nuances of international compliance.
The tax due safest digital room options available diligence process also considers whether a company has the potential to create tax-exempt presence in other nations. For example, an office in a foreign jurisdiction can cause local country income and excise taxes however, despite the fact that there’s a treaty between US and the foreign country could mitigate the impact, it’s crucial to be aware of tax risks and opportunities proactively.
We review the proposed transaction, the company’s acquisition and disposal practices in the past, and review any international compliance issues. (Including FBAR filings) As part of our tax due diligence process we also examine the documentation on transfer pricing along with the company’s documentation on the transfer price. This includes assessing the tax basis of assets and liabilities and identifying tax-related attributes that could be used to boost the value.
Net operating losses (NOLs) can result when the deductions of a business exceed its tax-deductible income. Due diligence can help to determine if these NOLs are feasible and whether they could be transferred to the new owner as a carryforward or used to lower tax liability following the sale. Unclaimed property compliance is yet another tax due diligence item. While it isn’t a topic of tax, state tax authorities are being scrutinized more in this regard.