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Why Is Tax Due Diligence Investigation Crucial For Acquiring A Target Company?

Acquiring a company or a merger between the two organizations is a stiff and challenging process. One of the key aspects in such instances is tax due diligence. Taxation is one of the key components for determining the overall profitability of a business. Hence, while you consider acquisition and merger, you must give ample consideration to the aspect of tax diligence. 
 
What are the various kinds of Tax Diligence?
 
Tax Diligence compromises of two parts- the seller side and the buyer side taux diligence. The seller side diligence, computed by the target organization to identify major tax implications, as well as finding remedial measures before exploring a prospective buyer. Likewise, Buyer side diligence is the computation by the buyer to identify the tax liability of the target company, before arriving at the purchase decision. While considering a merger or an acquisition, this is one of the key aspects to determine the final decision and outcome. 
 
 
 
 
 
What are the major areas covered in Tax Diligence Investigation?
 
Tax Diligence gets conducted after the initial rounds of analysis. A prospective buyer will only start evaluating the tax exposure after he/she is happy with the financial stability, reputation, and goodwill, market potential, as well as the business model for the target company. Following are the key areas of investigation: 
 
·       Tax Compliance: The acquirer tries to evaluate the potential tax liabilities in acquiring the target organization. This holistic knowledge throws light on the potential Compliance related risk at the time of merger and acquisition. Moreover, the target organization’s liabilities for taxation helps the proposed buyer to finalize a deal to offer for the acquisition. 
 
·       Tax Liabilities and Assets: Put in simple terms, Tax liabilities are the value payable by the target company as tax due but unpaid. On the other hand, Tax assets are the excess taxes paid in advance that the target company is eligible to claim a refund. Again, the proposed buyer will work on these values to determine the ideal price payable for acquiring the target company.
 
·       Employee Tax: Often, employees classified as contractors, paves the way for wrong tax computation. As such, the proposed buyer should conduct an investigation for identifying such mistakes and take appropriate remedial measures. 
 
Conducting a Tax diligence evaluation is a stiff task, and the best thing is to hire a professional tax services Ukraine company, specializing in these assignments. These professionals can help you with a detailed evaluation report that will speed up the acquisition process, helping you to determine the most profitable deal for the acquisition. However, you must hire an experienced service provider with a proven track record for its tax consulting services Ukraine, meeting their client’s expectations. You should always hire a company with expert and experienced professionals in its team, and featuring positive reviews and high ratings in favor of its services and solutions. 

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