Tax DD – external vs internal ?

This topic contains 7 replies, has 8 voices, and was last updated by  R Ganes Ramalingam 3 days, 9 hours ago.

Viewing 8 posts - 1 through 8 (of 8 total)
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  • #115797

    Gregory Weisser
    Participant

    Tax DD can be very complex and bears risks. From my experience we always engaged externals. Basically not just due to the lack of tax knowledge, but also to get a 3rd party opinion in that risky field.

    What would you consider in regards to covering a tax DD internally (own staff) or engaging someone external (big 4, tax consultant etc) rather doing on your own?

    #115846


    Participant

    Hi Gregory,

    You have raised an interesting question. I would get an external party to undertake the DD and the top element which I would be asking them to look for are elements of deferred taxation liabilities. Quite often I have found that a target looks great until I realise that they have been pursuing an aggressive tax avoidance policy for which I would then become liable for as the buyer. Additionally, double checking the value of any major assets relative to tax perspective, as aggressive devaluation processes could also leave me with problems.

    #123217

    The best strategy may be to utilize third party tax due diligence experts (not just general tax experts) to work with in-house tax professionals. It is unlikely that the in-house tax professionals will have sufficient and specific experience of tax due diligence to undertake this task without any external support.

    #123363

    Matthew Person
    Participant

    You should always match in-house tax with external advisors to ensure that the most eyes can be on the asset. Additionally, a third party advisor provides CYA coverage and can deploy more focused resources on the diligence effort, more so than internal staff I’ve found. The internal staff just action the findings in PMI thereafter.

    #123434

    Wessam AlZamil
    Participant

    We usually do a combination of both third party tax advisor and in-house tax professionals to provide assurance on the analysis

    #124125

    Anandan Rajagopalan
    Participant

    Hi Gregory,

    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.

    If it is a pure domestic company with simple organization structure located in simple tax regime countries (both buyer and target cos.) like in Singapore / UAE/ Hong Kong, it is going to be an easy report hence we could rely on in-house professionals who are more familiar with evaluation of a commercial venture from a tax perspective.

    Typically in large deals / cross-border deals, to avoid overpaying for a target, understand the exposure on currency differences, tax differences, employment differences, accounting differences and regulatory hurdles, it is advisable to engage 3rd party tax consultants. Unsure whether my view on your question and thoughts make sense.

    #124394

    Abdulaziz Noaim
    Participant

    Depending on the region of the targeted company, it would be decided if it is internal or external, but normally the targeted companies (for us at least) are in countries with complex tax systems.

    #124411

    R Ganes Ramalingam
    Participant

    Based on my M&A experience, when it comes to Tax DD we usually engage external party, professional tax consultant to perform the Tax DD and advise us accordingly as we mostly engage in cross boarder deals, our in house expertise might not have the knowledge or expertise in the target country.

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