Tax Due Diligence
Nowadays, in the fast-changing tax landscape, all transactions require some degree of tax analysis. Whether this takes the form of tax due diligence or advice on the investment structure, engaging with tax specialists at an early stage will allow you to factor in tax risks and tax opportunities from the negotiation phase.
Not only can our transaction tax specialists help you to assess and quantify tax risk related to previous transactions and operations, but they can also identify relevant tax aspects to be incorporated in your investment structure. With a joined up global network of experienced advisers offering a consistent approach, our tax experts can advise on even the most complex of multinational transactions.
Our tax transaction specialists have vast expertise in all areas of tax, including corporate taxation, VAT, customs, withholding taxes, employment taxes and property levies. The focus during a tax due diligence process is on historical compliance and the identification and quantification of risk and tax exposure, together with mitigation/correction actions. Typically, the areas to be covered as part of a tax due diligence include:
- Tax compliance: an assessment of whether the target is up to date with filings and payments across all areas of tax, observance of the legal tax rules in both form and in substance and the underlying economic sense of the transactions.
- Reorganizations: a review of previous group / company reorganizations or other material/exceptional transactions to identify historical risks or potential future tax costs. Equally, our teams review proposed pre-sale transactions to identify any potential tax risk for the main transaction going forward.
- Stock Option Plans: our experience tells us that share based payments are often an area of high tax risk, and therefore we would review any such share schemes in place to determine whether the correct tax treatment has been applied and whether there is any tax exposure on completion or going forward.
- Employment taxes: the status of self-employed contractors is an area where we often identify issues, therefore, where relevant, we would review contracts for such individuals. Additionally, our experts are doing reasonability test with respect to the labor taxes computed and withheld by companies in relation to their employees.
- VAT: our experts review VAT compliance, including transaction listings, partial exemption calculations, application of option to tax and the capital goods scheme.
- Transfer pricing: this is a very debated area in terms of tax audits and most often than not it can lead to significant tax exposure; therefore, our team of dedicated transfer pricing specialists are on hand to identify the risks and quantify any potential tax liabilities.
In parallel with tax due diligence work, it is important to consider how an investment is structured starting primarily from its commercial reasons, financial and tax perspective, legal protection requirements, etc. Our tax experts can help you to design an investment structure which also takes into consideration the significant tax aspects, among others, in terms of:
- How to finance an investment;
- Facilitating a future exit (or partial exit); and
- Providing a structure which caters for a future expansion of the group.
We have teams located around the world who work together to ensure that any tax structuring is suitable and efficient not just for Romania but for other locations where you may be based.