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Tax Due Diligence
Tax Due Diligence involves a comprehensive review of a company’s tax compliance and liabilities to identify risks and ensure adherence to applicable tax laws. This process is crucial during mergers, acquisitions, investments, or corporate restructuring to assess the tax health of an organization. Tax due diligence minimizes risks of undisclosed liabilities, penalties, and compliance gaps, safeguarding stakeholders' interests.
Importance
1. Risk Identification : Detects potential tax exposures and liabilities.
2. Legal Compliance : Ensures adherence to tax laws, reducing chances of penalties or scrutiny.
3. Valuation Accuracy : Helps investors and buyers assess the true financial health of a company.
4. Safeguards Transactions : Ensures smooth mergers, acquisitions, or investments with no hidden tax surprises.
5. Strengthens Negotiation Position : Provides clarity on tax-related issues, influencing deal terms.
Documents Required
Features
Features & Benefits of Tax Due Diligence
Risk Assessment
Focus on M&A Transactions
Historical Analysis
Compliance Verification
Tax Due Diligence
Custom Reports
Supports Valuation
Transfer Pricing Coverage
Litigation Advisory
Proactive Tax Planning
Comparison of Tax Due Diligence and Financial Due Diligence
| Feature | Tax Due Diligence | Financial Due Diligence |
|---|---|---|
| Focus | Tax compliance and liabilities | Financial health and performance |
| Scope | Direct taxes, GST, TDS, disputes | Revenue, expenses, assets, debts |
| Objective | Minimize tax risks and exposures | Assess overall business value |
| Applicability | Tax laws and regulations | Accounting standards and financial reporting |
Frequently Asked Questions
What is tax due diligence?
It is a detailed review of a company’s tax compliance, liabilities, and exposures to assess its tax health.
When is tax due diligence required?
During mergers, acquisitions, investments, corporate restructuring, or internal audits.
What are the key areas reviewed in tax due diligence?
Income tax, GST, TDS compliance, litigation, exemptions, and transfer pricing.
How long does tax due diligence take?
It typically takes 2-4 weeks, depending on the company’s size and complexity.
Can tax due diligence uncover hidden liabilities?
Yes, it identifies undisclosed liabilities, compliance gaps, and risks from pending disputes.
What is the role of Form 26AS in tax due diligence?
It reflects TDS, advance tax, and self-assessment tax payments for reconciliation with filings.
Is GST compliance part of tax due diligence?
Yes, GST filings, input tax credits, and reconciliations are reviewed for compliance.
Can tax due diligence help in reducing liabilities? tax planning legal?
Yes, it identifies errors, missed credits, or exemptions that can reduce liabilities.
What happens if compliance gaps are found?
Corrective measures are recommended, and strategies are provided to mitigate risks.
What is the output of tax due diligence?
A detailed report highlighting findings, risks, and actionable recommendations.
Related Services
M&A Tax Due Diligence
Direct Tax Compliance Review
GST Audit & Verification
TDS & Withholding Compliance
Transfer Pricing Analysis
Historical Tax Litigation Review
Tax Credit & Exemption Validation
Deferred Tax Asset/Liability Check
Tax Reconciliation & Reporting
Tax Due Diligence Reports
Post-Due Diligence Advisory
Tax Risk Mitigation Strategies