For potential targets that are operating cross-jurisdiction with operating entities spanning across different jurisdictions, how should the acquirers embark on the tax due diligence such that it is properly effective and efficient?
Hi Jesslyn, Tax due diligence is a comprehensive examination of the different types of taxes that may be imposed upon a particular business, as well as the various taxing jurisdictions in which it may have sufficient connection to be subject to such taxes.
Typically in large deals / cross-border deals, to avoid overpaying for a target, understand the exposure on currency differences, tax differences on corporate taxes, transfer pricing, VAT/GST taxes, customs duties, stamp duties, employment taxes/ benefit differences, accounting differences and regulatory hurdles, it is advisable to engage 3rd party tax consultants.
Approach to Tax Due Diligence can be like this so that it becomes effective and efficient:
1. Initial Planning – Understand commercial /value drivers/identify industry issues
2. Data Gathering- collection of information / documents, interview with management personnel involved
3. Data Analysis- review of information/documents, corroboration of management discussion with documents reviewed
4. Present Findings – Description of issues/upsides identified / key transaction advice / high level mitigation options, if any
Hope this supports your question cross- jurisdictional tax diligence
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