Tax Due Diligence
Description of possible reviews and their scopes of work                                                          Back to Due Diligence Panel

1. Full due diligence

What is it?
A review that provides an understanding of the tax situation of the company for all years open to tax inspection. Full due diligence procedures provide an in-depth knowledge of the company’s tax policies, detection and estimation of possible tax contingencies and an evaluation of the possible consequences of a tax inspection.

When is it recommended?
Recommended for all acquisitions and investments, given that it allows the identification of possible tax risks and as a result provides the acquiring party information with which to reduce its risk. Full due diligence procedures are especially recommended where the target company operates in a business sector where there are typically tax risks.

2. Diagnostic review

What is it?
A detailed review of the most recent closed tax year open to inspection, together with a less-detailed review of all other years open to tax inspection. A diagnostic review aims to provide an understanding of the tax situation of the company and of its most significant tax policies, but also aims to determine and quantify as far as possible any tax contingencies and the consequences thereof, as well as an evaluation of the possible consequences of a tax inspection.

When is it recommended?
Recommended for operations in which the target company is well-established and operates in a mature business sector, where activities are very similar year on year. A limited review is also recommended where the percentage shareholding being acquired is not too significant.

3. Limited review

What is it?
A detailed review only of the most recent closed tax year open to inspection in order to understand the company’s most significant tax policies, detect and estimate possible tax contingencies based only on the most recent tax year, together with an evaluation of the possible consequences of a tax inspection.

When is it recommended?
Recommended for operations in which the target company is well-established and operates in a mature business sector, where activities are very similar year on year. A limited review is also recommended where the percentage shareholding being acquired is not too significant.

4. Quick review

What is it?
A review of limited documentation with the aim of identifying the main areas of potential tax risk. According to the results of this review, additional procedures can be included to understand which tax risks may be significant.

When is it recommended?
Recommended for transactions where a low shareholding percentage will be acquired and for a short period of time, in addition to those operations where there is a limited time-frame and limited documentation available, but where the acquirer wishes to gain at least some understanding of the tax situation of the company.

5. Specific review

What is it?
A review of only certain tax areas based on an assessment of the nature of the company and of its business activities, with no coverage of other areas that would be included in other review processes described above.

When is it recommended?
Recommended for transactions in which the particular characteristics of the target company mean that the fuller review procedures described above do not cover or exceed the procedures that are deemed necessary.