The tax returns, assessments and supporting documents a buyer's tax advisers request to find historical exposures and plan the deal structure – as a numbered checklist.
In a share purchase the buyer inherits the company's tax history: any underpaid tax from open years becomes the buyer's problem after closing. Tax due diligence therefore looks backwards for exposures, typically over the period the tax authorities can still reopen, and forwards at how the transaction itself is taxed and whether valuable attributes such as tax losses survive the change of ownership.
Findings usually end up in the tax covenant or tax indemnity and in the price: a quantified exposure is either paid for by the seller, covered by a specific indemnity or insurance, or deducted as a debt-like item. The list below groups requests by tax type, which is how most tax advisers structure their report. Limitation periods and rules differ by country, so treat the year ranges as a starting point to confirm with your adviser.
Sellers can make tax due diligence faster by collecting the returns, assessments and correspondence for all open years in one folder per tax type, reconciling the tax charge in the accounts to the returns, and writing a short memo on any known issue with how it was resolved. A known, documented issue is usually priced calmly; the same issue discovered by the buyer late in the process tends to cost far more.
Numbered like a data room index: use the sections as folders and keep the numbers in file names.
The CSV opens in Excel, Numbers or Google Sheets. A practical starting point – adapt it to your deal and jurisdiction with your advisers.
The buyer's tax advisers, often part of the same accounting firm that runs financial due diligence, plus local tax advisers for each jurisdiction. Warranty and indemnity insurers also review the tax report.
Runs alongside financial due diligence, typically 3–6 weeks; cross-border groups take longer because each jurisdiction is reviewed.
A review of a company's tax compliance and exposures in its open years, and of the tax consequences of the transaction, so the buyer can price or protect against inherited tax liabilities.
Usually all years still open to audit by the tax authorities – commonly 3 to 6 years depending on the country, and longer where fraud or non-filing is involved. Confirm the period with a local adviser.
Less, because most historical tax liabilities stay with the seller. It still matters for transfer taxes, VAT on the transfer, employee-related taxes and any liabilities that follow the assets under local law.
Through tax warranties, a tax covenant or indemnity from the seller, specific indemnities for identified issues, price reductions or warranty and indemnity insurance.