Due Diligence: Tax Due Diligence

Mar 23

THIS IS THE FREE, REDACTED VERSION OF THE TASKS IN THE M&A REFERENCE MODEL  AND IT IS LICENSED UNDER Creative Commons Attribution-NonCommercial-ShareAlike 4.0 International THE FULL SET OF DATA HAS TO BE LICENSED COMMERCIALLY.  HERE is a full model example for one task.

The task has the following goal(s):

Target company tax: analyzed

Draft tax integration plan: prepared

Tax effect of the financing concept: analyzed

Tax clause in acquisition contract: prepared

Tax effect of the financing concept: optimized

The task has the following objectives:

Risk: minimized

Quality: maximized

Information asymmetry: minimized

Short description of task Tax Due Diligence:

Within the scope of tax due diligence, we check hypotheses about all tax-relevant transactions of all companies of the target in all countries. This examination is usually performed by external lawyers and auditors.

The task uses the following business object types:

Planned target tax payments, Tax planning of the target, Tax authority, Shareholder meetings, Shareholder resolutions, Managing director contracts of the target, Managing director of the target, Rules of procedure of the target company, Articles of Association of the target, Target statutes,

Questions to be used during the execution of the task

The task is executed with the following questions, among others:

Does tax planning exist?
Were tax payments and returns submitted correctly and on time?
Does the target company have tax advantages? Will they be affected by this transaction?
Does the target company face the threat of back taxes?
What do the vendor's annual, quarterly and (if available) monthly financial statements for at least the last three years tell us about the vendor's financial performance and condition?
Are the vendor's annual financial statements audited, and if so, for how long? Does the audit report contain a 'going concern' qualification?
Do the financial statements and related notes list all of the seller's liabilities, both current and contingent?
Are there any limitations on the cash of the seller or the repatriation taxes due in respect of foreign subsidiaries?
Which control and profit and loss transfer agreements exist and what is their effect on the taxes of the target company?
Which transfer prices/transfer prices are established between sub-companies of the target company and are they in conformity with the rules?
Are criminal tax proceedings underway against the target company?

Are there any legal proceedings by the target company against the tax authorities?

THIS IS THE FREE; REDACTED VERSION OF THE TASK IN THE M&A REFERENCE MODEL: THE FULL SET OF DATA HAS TO BE LICENSED

Karl Popp www.drkarlpopp.com