Closer Look at Tax Due Diligence and Health Checks At Enterslice, we understand the specific needs of the businesses and investors. You will get the advice of our tax specialists' team which will provide you with timely tax health checks per your commercial needs. Our team's monthly and quarterly reports will consist of an in-depth analysis and expert opinion. We don’t follow a "one size fits all" approach; our approach is customized and tailor-made to your business needs. Our flexible reports are designed meticulously by certified tax experts and consultants to provide seamless quality content. We also prepare comprehensive due diligence reports and conduct health checks to identify red-flag areas. Our client base 1000+ is a testimony to our successful tax due diligence services. Overview of Tax Due Diligence There has been a constant change going on globally in the taxation system. With increasing digitalization, tax authorities can monitor tax compliance effectively. This has led to a rise in the companies consulting for tax due diligence services. Tax Due Diligence is the species of the genus Due Diligence. We examine and analyze the company's tax expenses and tax issues in this process. This process is done before the company's acquisition when you enter into a Merger and Acquisition Company. Tax due diligence helps you make an informed decision; therefore, it is a sine qua non. Due Diligence Meaning Due Diligence is a risk assessment process of a business transaction. In common parlance, a background check ensures that the parties involved in the transaction have the information they need to proceed with the transaction. During this process, confidential, legal information is exchanged by the interest parties who are part of the said business transaction. Types There are many types of Due Diligence: Legal Due diligence, financial due Diligence, and tax due diligence. Tax due diligence is the detailed analysis of the target company’s tax expenses and its past tax compliances. Our Services in Brief Buy-side Tax Due Diligence Sell-side Tax Due Diligence Tax Due Diligence for Internal Evaluation Identifying risk areas Our Expert Analysis Red Flag Areas Our tax experts shall help you identify red flag areas of the target company while executing an M&A agreement through our tax due diligence services. Our tax attorneys negotiate clauses of the contract, damage indemnifications, etc., while drafting transaction necessary papers to avoid any future dispute. Tax Health Check Regular tax health checks are important for companies so that they can review their tax compliance and prevent further tax risks in their day-to-day operations. Tax Compliance Status Our tax experts assess the tax compliance status of the target company, identify risk areas, and assist with task risk management and other measures. How can Enterslice help you? Tax Structuring Services We help you by providing the tax structure analysis of the target company. We also recommend you focus on the target company’s operational structure to mitigate any future tax risks. We also give recommendations on the effective acquisition of the company and effective profit-sharing mechanisms. Tax Consultation Services Our robust team of certified tax experts will analyze tax implications for non-resident investors. Data Room Services We shall help set up and manage the data room. Tax Risk Assessment Services We provide you with a tax risk assessment of the target company so that you can make an informed decision and improve your negotiating position. Preparing Tax Due Diligence Reports Our tax due diligence reports are brief and issue-focused. We highlight the tax-related aspects that can impact your transaction. We give you an in-depth picture of the target company operations and strategic aspects impacting the state of the business's affairs. Multidisciplinary Approach We work in an integrated multidisciplinary approach by analyzing relevant transaction tax, valuation, and other strategic aspects affecting the transaction. Buyer Due Diligence We help you in appointing consultants to carry out the buyer-side tax due diligence and prepare a report based on the findings. Vendor Due Diligence We help you in appointing consultants to carry out the vendor-side tax due diligence and prepare a report based on the findings. Objective of Tax Due Diligence Collecting accurate information from the target company Make an informed decision regarding the investment Conducting SWOT analysis to identify strengths, weaknesses, opportunities, and threats of the target company Improving the bargaining position of the buyer company Identify areas where disclosures are mandatory M&A Tax Due Diligence Tax due diligence in common parlance is also known as fiscal due Diligence. It is a process of taking stock of all the taxes that a company must pay. In this process, we assess the company's total tax liability and its level of compliance with those tax laws. For instance, validating tax returns of three to five years of the target company and analyzing tax audits and agreements with tax agencies are some of the methods of conducting tax due Diligence. Such an exercise aims to ensure that the company's taxes are paid in a timely manner. Need for M&A Tax Due Diligence M&A tax due Diligence aims to identify any possible tax deal breaker. A thorough analysis of a target company's tax history, tax obligations, and the consequences of the tax deal is crucial for a profitable transaction. M&A Tax Due Diligence Process The tax due diligence process is to be done in the cases where the buyer or the acquirer requires that the target company be examined so that the buyer or acquirer can make an effectual decision. The M&A tax due diligence process involves the following process:- Understand Target company’s tax structure Understand Target company’s transaction structure Understand Target company’s tax history Analyse Target company’s tax compliance TRANSFORM YOUR TAX DUE DILIGENCE WITH ENTERSLICE. CALL US!!! Tax Due Diligence & Tax Risks Paying tax is an unavoidable expense. Usually, tax due Diligence is conducted to understand the tax profile of the target company before closing out on an M&A deal. However, tax due Diligence can also help the buyer identify any tax upsides and develop a suitable acquisition structure. While conducting tax due diligence, ensuring that the buyer company has an adequate protection mechanism is important. The buyer must balance their need while negotiating for tax protection measures with the seller. Therefore, it is imperative for both the buyers and sellers to engage in a thorough tax due diligence process to identify the tax risks in a transaction, resolve them amicably through discussions and negotiations, and finalize the transaction. Challenges in Tax Due Diligence There are some challenges encountered during tax due diligence services, which have been mentioned below- Abusing tax exemptions or incentives Issuing fake invoices Tax Evasion agreements Unreasonable transfer pricing Failure to settle individual income tax Underreporting of income Exaggeration of expenses Not making adjustments for accounting Transfer Pricing Issues in Tax Due Diligence Analysis of carry forward of losses Analysis of tax holidays Tax dispute resolution and litigation Analysis of deductions and exemptions claimed by the target company Indirect Tax Issues in Tax Due Diligence Service Tax Issues: These are challenges like non-payment of service tax as a recipient under reverse charge and payments to related parties. Excise Tax Issues: Challenges like incorrect classification of goods, area-based exemptions, and valuation of supplies. Cross Border Tax Issues Transfer Pricing issues Transfer pricing issues are very common in the tax due diligence process of having an Indian target company with an offshore presence. Evaluation of arms-length's price is outside the scope of the tax due diligence exercise. Transfer pricing Paper works depends upon various factors like industry sector, business model, relation with offshore parties, transfer pricing methodologies adopted by Indian Target Company, any advance pricing arrangements with tax authorities, tax history, etc. Using this, the buyer can prevent any potential transfer pricing risks. Additionally, in global deals whereby an indirect transfer of Indian assets is involved, these transfer pricing considerations must be taken into account. Thin capitalization norms It is important to check for denial of tax breaks on interest pay-outs to the parties due to thin capitalization norms. Foreign Entity It is important to evaluate tax exposure for foreign MNCs earning income from India. The Indian government may also levy a digital tax called an equalization levy on foreign MNCs operating in India. Tax Withholding As per Indian tax laws, TDS (tax deduction at source) is deducted from the payments made to residents or non-residents. Therefore, a global MNC in India must comply with these tax laws on domestic and international transactions. Non-compliance with withholding tax obligations can lead to a levy of penalty and interest. Distressed Buyouts A comprehensive tax due Diligence must ensure that the entity that is under an insolvency process has a resolution plan with provisions granting relief from past tax claims. Negotiating Strategies in Tax Due Diligence A complete tax due Diligence not only detects risk but also advises on the mechanisms for the buyer company to address those risks. Some modes to address those risks have been mentioned by us- Tax Warranties and Indemnities Warranties protect the target company from any unforeseen tax liabilities. In case a warranty turns out to be inaccurate, the buyer must be entitled to seek damages or indemnity. The coverage of these warranties is either for general tax liabilities occurring before the deal closing or liabilities related to specific tax issues. The scope of general warranties is quite broad and shows that the company has paid all its due taxes before deal closing, filed all tax returns, and has fully complied with all the applicable tax laws. Specific warranties include legislative provisions and show that no tax risks exist due to such provisions. These warranties must be brief and precise to showcase the viewpoints of the buyer company in the transaction process. Valuation Adjustments By conducting proper tax due diligence, the buyer company can have a thorough knowledge of the tax risks which can enable them to consider an adjustment in the valuation of the company. As an alternative, the buyer can retain part consideration in an escrow account, which shall be released after a pre-agreed time. Tax Due Diligence necessary papers We have meticulously prepared a tax due diligence checklist for your perusal- Accounting records of the target company Tax Returns of the target company Minutes of the meeting of the target company Board composition of the target company Perks offered to the employees Contracts and other legal necessary papers of the target company Market share of the target company Types of Tax Due Diligence Process Tax Due Diligence Buy-Side This type of tax due Diligence is done by the buyer company that is going to acquire the target company to avoid any possible future disputes. The buyer and the seller executing the M&A agreement must share the necessary papers related to tax due Diligence in a secure room. Tax Due Diligence Sell-Side This type of tax due Diligence is done by the management of the company that is being acquired or sold. The target company appoints consultants to carry out this tax due Diligence to highlight the exposure or upsides. 49% of the M&A transactions fail due to issues in the tax due diligence process. If the sell side conducts their tax due Diligence properly before the buy side gets involved, then they can identify and solve any issues before the buyer gets involved. This would result in a seamless and hassle-free acquisition process. Focus Areas of Tax Due Diligence There are some of the focus areas that you need to touch while conducting tax due Diligence- Tax Compliance- It is important for us to make sure that the target company adheres to all government compliances. Tax Credit: It has to be seen if any tax liability is wrongly claimed or not. Employee Tax Structure: The target company's employee contract and compensation structure have to be analyzed. Tax assets and liabilities: The tax liability of the target company has to be examined by the buyer company. Tax Due Diligence Checklist Our comprehensive tax due diligence checklist can take away your stress as we have made your work easier. These necessary papers provide a gainful insight into the company’s structure and methodology thereby helping to make an informed decision and mitigate any possible future risk. Balance Sheet: The balance sheet of the company discloses tax paid by the target company. It showcases the tax history of the company. Accounting Methods: Check the type of accounting methods followed by the target company and see if they align with the company's law. Income Tax Returns: Examine the company's tax history and see if timely payments are made. Tax Audit: Check and verify the tax records and transactions. Foreign Tax Environment: Understand the target company’s foreign tax environment. Company Sales: Understand the target company’s sales. Our Holistic Approach Enterslice's tax due diligence services are crucial for M&A deal-making. At Enterslice, we, therefore, include tax experts who provide expert analysis and have in-depth knowledge regarding tax health checks. As a part of our persistent tax due diligence efforts, we can analyze your existing and future tax exposures along with reviewing your tax compliance history through your correspondence with the tax authorities, thereby gauging your post-transaction tax risk. Our tax due diligence services aim to develop a comprehensive report of your past, current, and post-transaction tax position so that you can ponder over some tax management strategies. Our team of tax professionals helps you dissect tax considerations and lets you know which tax structures could support your business model and mitigate your tax risks. Significance of Tax Due Diligence You might be wondering what the significance of taking these services is. Therefore, we shall now throw light on some of the benefits of tax due Diligence- It helps in detecting tax evasion. It helps prevent any future disputes that may arise between the parties. It helps in understanding the structure of transactions done by the company. Any errors in tax due Diligence can attract heavy penalties from the government. It helps in making an informed and wise decision. It helps in understanding the tax profile of the target company. It helps in validating the credentials of the seller company. It helps the buyer company to design a post-M&A tax plan for the target company. It helps in analyzing the tax incentives and tax credits. Finalizing the deal in a tax-efficient manner Identification of tax-saving opportunities Role of Tax Preparer in Tax Due Diligence The tax preparer determines the accuracy of the tax records given by the taxpayer. It examines if in case any tax liability has to be cleared and paid off. Tax Preparers must keep the records and necessary papers with them for at least 3 years. Due Diligence Process Pre- Due Diligence Process It is the first step which includes the management of Paper works and people. In this step, you have to sign the Letter of Intent and the Non-Disclosure Agreement with the target company and arrange the necessary papers required for Diligence. Due Diligence Process After successfully conducting the Diligence, the professional submits a Due Diligence Report. Post Due Diligence This process helps the investor negotiate the deal. In this process, non-compliances found during the process of conducting due diligence are rectified. Features of Tax Due Diligence Done by both the seller and the buyer of the target company It is not a mandatory process. It’s up to the discretion of the parties. It is highly confidential, as only the buyer and seller parties are aware of it. Consultation for Tax Due Diligence Fill the Form Please fill out the form on our website regarding your queries related to tax due diligence services. Also, specify if you are an individual or a corporate entity. Schedule an Appointment You can schedule an online appointment with our certified tax specialists, who shall provide you with a tailor-made solution to your queries. Choose the time slot at your convenience. Select a Plan Choose the most appropriate tax due diligence plan. Make Payment You can make the payment through any of the following modes- Gpay, credit card, or debit card. Submit the necessary papers Submit the relevant necessary papers that are required as per your selected plan and upload them. We assure you that your personal information is in safe hands. Our Tax Specialists will call you. After the successful completion of your payment, our tax specialists will reach out to you as per the prescribed time period to provide you with the consultation. Our Vision and Values Core Values We trust you and would do anything to keep your trust intact. We engage with the community without staking our core values and vision. Customer Friendly Services The core of our business is our clients, and our experts are polite and respond promptly to our customers' queries. Our motto is to develop long-term and trustworthy relationships with our clients. Consistency We provide our clients with an environment that is consistent and convenient for our clients. Online Process Our team of proficient tax experts shall provide you with sound tax advice tailored to your specific needs. The entire procedure is online or via telephone conversation and is hassle-free. Benefits of our Services Our Tax Due Diligence Services have been preferred by many investors and companies because- Feedback: We provide targeted and useful due diligence feedback that adds value to your business. Commercial Recognition: We have Commercial Recognition combined with practical experience. Meeting the deadlines: We work as per timetables and deadlines. Economic services: We provide economical services, ensuring that clients receive the most bang for their buck. Prior records: Our prior records in tax due diligence will show you how efficient our services are. Years of Experience: Our team of certified tax specialists has decades of combined experience in tax due Diligence. Video Conferences- We provide tax due diligence services for our busy clients through video conferencing while maintaining confidentiality. What makes us different from others? Our team members have a diversified industry experience. Our tax professionals will help you with day-to-day aspects Real-time feedback regarding any tax issue Assistance during pre-due diligence process Assistance with the resolution of any new tax issue that may arise post-tax due diligence process. An international network of tax due diligence specialists in 100+ jurisdictions Close association with other due Diligence like financial, and legal due Diligence. Working closely with buyer and seller sides for effective resolution of tax disputes. Our Successful Journey One of the most attractive reasons to hire Enterslice for your tax due diligence services is our proven track record of success. We specialize in assessing your tax history and advising with our level of expertise. That’s why we have a higher success rate in successfully incorporating tax due diligence of 1000+ companies. Additionally, we have an alliance with popular tax firms in India and globally as well. Why Choose Enterslice for Tax Due Diligence Services? Our team of competent Legal Consultants and proficient tax experts cater to the needs of our 10000+ client base by providing them with cutting-edge Tax due diligence services. Prompt response in tax due diligence services to minimize our clients' stress. 97% client satisfaction in tax due diligence services Our Expert Team at Enterslice has a good understanding of income tax laws and therefore can help you by providing apt legal advice related to tax due Diligence. Free Legal consultation by our AI chatbot. Free expert call by our team to resolve your query. Complying with the data privacy norms and keeping the information of clients confidential.
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