ABSTRACT
Tax due diligence is about both risk and opportunity. The challenge is to keep the tax advisers focused on the commercial picture. Tax overlaps with both legal and financial due diligence, which means that whoever is working on tax must liaise closely with the financial and legal advisers to ensure that information is properly shared. Data rooms are unlikely to give more than a rough outline of the target's tax history. Data rooms and disclosures against tax warranties are valuable information sources but, as with other forms of due diligence, there is no substitute for direct access. At an early stage in the during tax diligence exercise, a useful piece of analysis is to build up a profile of the target's risk profile. Transfer pricing is a mechanism which is used as a means of reducing tax. Due diligence should determine the target's exposure to transfer pricing adjustments and any likely tax liabilities.
