Tax Planning with Sales/Purchase/Takeover/Merger

• Define commercial objectives

  • Decide what you want: buy assets, buy shares, acquire only lines of business, preserve tax losses, quick close, minimize cash tax now, etc.

  • Commercial objectives drive tax choices.

• Early tax scoping / preliminary tax mapping

  • High-level inventory of likely tax issues: capital gains, GST/VAT, stamp duty, withholding taxes, transfer taxes, payroll taxes, indirect tax on supplies, tax attributes (losses/credits), group relief, cross-border issues.

  • Flag major “deal breakers” early.

• Tax due diligence

  • Deep review of the target’s tax filings, audits, outstanding liabilities, disputes, transfer pricing, historic transactions, structure of contracts, payroll and employee benefits.

  • Identify contingent liabilities and exposures.

• Valuation & modelling

  • Model tax consequences of different structures (asset sale vs share sale vs slump sale vs merger) — show after-tax proceeds, timing of taxes, and cash flow impact.

  • Include scenario sensitivity (e.g., stamp duty rates, tax on deemed income).

• Structure selection

  • Compare main routes:

    • Share purchase — usually preserves tax attributes; buyer steps into existing contracts and historical tax risks.

    • Asset purchase — buyer gets a clean slate for many liabilities but may face higher indirect taxes (and sellers may face capital gains).

    • Merger / takeover / amalgamation — may allow tax neutral reorganizations in some jurisdictions.

  • Consider hybrid approaches (part share / part asset), earn-outs, or tax indemnities.

• Detailed tax planning & negotiation

  • Negotiate price adjustments, indemnities, escrow for tax liabilities, representations & warranties, and covenant scope for tax matters.

  • Plan specific tax mitigation: timing of disposals, use of tax losses, step-ups in tax basis (where allowed), use of tax treaties for cross-border dividends/interest/royalties, and any available exemptions or roll-overs.

• Regulatory and indirect tax checks

  • Check stamp duty, registration requirements, competition/antitrust filings (which can have tax timing effects), and where GST/VAT applies on asset transfers or business transfers.

• Documentation & closing mechanics

  • Draft SPA / APA / merger agreement with tax clauses: who pays a particular tax, indemnity caps, notification requirements for audits and settlements, cooperative conduct in case of disputes.

  • Implement pre-closing restructures if necessary (carve-outs, asset transfers).

• Tax filings, consents & clearances

  • File any necessary pre- or post-transaction notifications with tax authorities, obtain advance rulings where helpful (if available), and prepare for transfer pricing documentation if IP or cross-border pricing is involved.

• Post-deal integration & remediation

  • Integrate tax reporting systems, transfer pricing policies, payroll and benefits.

  • Close out pre-closing tax workstreams (e.g., VAT refunds, final returns).

  • Monitor for tax audits and trigger indemnity/escrow as needed.

• Ongoing monitoring

  • Track utilization of carried-forward losses, tax attributes, any post-close adjustments, and comply with reporting obligations.

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