Before proceeding with the planned acquisition of a company, entrepreneurs more and more often decide to conduct due dilifence, thanks to which they make sure that the acquisition of a new company will not have any negative effects on their business. As many people are primarily worried about money, financial due diligence seems to be the most obvious choice. Sometimes, however, it is just as important – or even more important - to identify the risks associated with another aspect of the company’s operation. Of course, it is about avoiding disputes with the tax authorities.

The scope of the tax due diligence service includes the implementation of tasks that will allow our experts to examine the tax situation of the company. As part of the due diligence report prepared for this purpose, professional advisors reassure buyers whether the other party to the transaction has complied with the due diligence rules when settling accounts with the tax office and fulfils its obligations.

Why is it worth doing tax due diligence?

As you know, there are different types of due diligence. Vendor due diligence is commissioned by the owners of the sold enterprises who want to prepare themselves for transactions and negotiations with potential buyers. Financial due diligence is already ordered by the other party to the transaction – it allows them to get a full picture of the company’s financial situation. Properly conducted legal due diligence allows, in turn, to be sure that the company operates in accordance with the provisions of the Commercial Companies Code. And what information does the activities of experts in the field of tax reviews bring and what does such due diligence protect against?
Tax analysis of the company carried out as part of due diligence is aimed at identifying the tax risk in the company and determining whether this risk will pass to the buyer upon completion of the transaction. In this case, due diligence carried out by RSM Poland’s advisors will make it possible to determine whether the existing tax risks are significant enough to purchase the enterprise (organised part of the enterprise) or whether it is possible to simply purchase shares in the entire company.

Tax due diligence analysis in practice

A well-executed tax due diligence allows, first of all, to know the quality of management of the acquired enterprise from the tax point of view. Thus, if the tax settlements of the acquired enterprise are carried out by the internal finance department, the tax due diligence carried out by RSM Poland will make the buyer familiar with the quality of the procedures applied there and receive information on the correctness of tax settlements. 
An experienced tax advisor, after conducting a tax audit, is able to easily point out to the buyer the deficiencies or shortcomings of the procedures currently in place in a given company. This is important not only in relation to the past of the acquired enterprise, but also allows the buyer to analyse the upcoming consequences of potential tax risks and prepare for them or prevent them altogether.

What information does due diligence provide?

The information obtained as part of the due diligence process can be really crucial and affect the final price of the company being sold. Thanks to the support of tax advisors, the transaction party seeking to buy a company receives: 

  • specific data on the size of the tax loss in the enterprise;
  • information on tax credits available for deduction after the acquisition of the enterprise;
  • a list of potential tax risks that may adversely affect the future financial situation of the company.

An important element of the study is also the verification of how often the surveyed company underwent tax inspections – i.e. whether it is an activity generating potentially frequent tax inspections and whether the company is a party to pending tax proceedings.

Tax due diligence

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Tax due diligence at RSM Poland

The scope of the tax due diligence we offer includes activities during which RSM Poland experts focus on both the company’s documents and information obtained from persons settling taxes in the company. The tax analysis carried out in this way allows you to easily identify specific areas of risk. 
Importantly, as part of the due diligence services we offer, we are able to carry out research also in the case of time-limited access to documents on the part of the examined person. 
The entire due diligence process is transparent and consists of several steps. We start the survey by providing the respondent with a list of requirements for documents and information. Tax analysis, which we then carry out, can be performed both through access to a virtual database, as well as traditionally, through the analysis of documents in the audited company. After completing this stage, i.e. exhausting the available due diligence tools, examining all available information and conducting a round of questions and answers from the respondent, we prepare a research report that contains conclusions in the areas mentioned. 
As a result, by combining our experience in tax consultancy and the information obtained about the audited entity, we are able to select those areas of the company’s activity that should be specifically audited. Therefore, if you want to acquire a business and you are interested in the tax aspects of the business activity that is the subject of the transaction, we recommend that you consider tax due diligence carried out by our specialists.

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