Tax Due Diligence

Tax Due Diligence

Tax Due Diligence is required at the time of merger or acquisition or tax litigation or preparation of standard operation procedure (SOPs). While setting up new business tax due diligence helps in effective tax planning.

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Tax is one of the major concerns for every business entity, it is so because once the actual liability of tax is erroneously computed then it would result in tax litigation and may involve interest and penalty on tax. Such tax litigation cost and unnecessary tax interest and tax penalty can be avoided by the entity if proper analysis is conducted. Here comes the concept of due diligence, Due Diligence provide relevant information and its associated risks.

Where the need of Tax Due Diligence required:

  • In Merger and Acquisition transaction, the investor need to assure commercial, financial and tax due diligence it helps not only in identifying the associated risks but also helps in negotiating the deal based on the inherent risks and its associated costs concerned.
  • In Tax Litigation, the tax payer (assessee) need to assure regarding the associated risk relating to the financial and tax return compare to the overall cost to be incurred in the litigation, it helps to make a decision to go for tax litigation or to go for deposit of tax, however this sounds confusing and controversial for the entities, because in practicality in most cases if the assessee pays the tax as demanded by tax officer, then tax officer open other year cases on same cause.
  • In Setting up new business, tax due diligence is required to analyse the proposed tax expense cost and to conform for the clarity in tax laws, in case there is ambiguity then the entity can proceed to obtain advance ruling of tax based upon tax due diligence report.
  • In expanding the business globally, tax due diligence to require analysing the tax impact globally and inherent risks involved in investment and repatriation of money from taxation point of view. From this due diligence report the business entity seek to know the overall tax impact and its inherent risks and can implement a better tax planning based upon Due Diligence Report.

Points to be considered in Tax due diligence

  • Understanding the nature of business of the entity and map the applicable tax laws and relevant tax rules including circular and notification as applicable to the entity.
  • Analyse the historical data of the entity by mapping the tax structure and compare with the peers of the entity in order to analyse the overall tax impact, its cost and inherent risk to the entity
  • Understanding the proposed transaction and map it with the applicable tax laws to analyse the tax cost involved and also conduct tax due diligence on merged company (in case of merger and amalgamation)
  • Preparing and analyzing a comprehensive review on historical income tax and non-income tax data (Non income tax data covers GST / Payroll Tax, Other tax levied by State Government / Property tax etc). Analyzing of historical compliance overview and map it with the exposures of entity.
  • Analyzing the impact of tax on legally binding contracts and agreement entered into by the entity.
  • Analyse the impact of tax credits, deferred tax, and tax exemptions and relief that are applicable to the entity.

With the ever changing Law and regulatory requirements, we keep on track and advise the same on timely manner in order to ensure proper compliance. We at ReturnFilings.Com will understand the purpose of your tax due diligence and thereafter will provide you detailed analysis mentioning the law requirement and compliances need to fulfil in order to prepare report on tax due diligence economically and efficiently. We at ReturnFilings.Com will provide you details of regulatory filings in order to ensure proper smooth and timely compliances. We at ReturnFilings.Com are determinate to provide end to end solution; our motto is you concentrate on your business while we at ReturnFilings.Com will take care of all your compliances need.