Tax due diligence is often left out when planning for the sale of the business. Tax due diligence results can be critical to the success or failure of a business deal.

A rigorous review of tax regulations and tax rules can reveal potential issues that could cause a breach before they become a problem. These can be anything from the fundamental complexity of a company’s tax position to the specifics of international compliance.

The tax due diligence process also examines whether a business is likely to create taxable presence in other countries. A foreign office, for instance could trigger local taxes on income and excise. Even though a treaty may mitigate the impact, it’s vital to be prepared and be aware of the potential risks and opportunities.

We analyze the proposed transaction, the company’s transactions with acquisitions and disposals in the past, and review any international compliance issues. (Including FBAR filings) As part of our tax due diligence process, we also look over the documentation on transfer pricing and the company’s transfer price documentation. This includes assessing the assets and liabilities’ tax basis and identifying tax attributes that could be utilized to maximize the value.

For instance, a company’s taxes deductions could be higher than its income taxable, leading to net operating losses (NOLs). Due diligence can help determine the extent to which these NOLs are realizable and whether they could be transferred to the new owner as an option to carry forward or click for more info about Paperless board meetings guide reduce tax liability after the sale. Unclaimed property compliance is a different tax due diligence issue. While not strictly a topic of tax taxes, tax authorities in states are becoming more scrutinized in this regard.