Tax due diligence
The tax component of pre-acquisition due diligence. It examines reassessment risks, tax elections made, tax credit balances, applicable tax treaties, and the consistency of intra-group transfer pricing.
In practice
Tax due diligence surfaces risks that do not appear on the balance sheet: an IP Box election exercised for two years without adequate nexus-ratio documentation exposes the target to reassessment on both open years. A research tax credit applied to ineligible expenditure can become a tax liability with interest. These contingent liabilities are negotiable as price reductions — earn-outs, asset and liability guarantees. Quantifying them precisely is the central objective of this audit phase.