Tax due diligence
Tax due diligence may be necessary not only when acquiring companies, but also in other cases. Such situations include, among others, a comprehensive tax audit, a VAT inspection prior to allocation, or an organisational change.
In the case of a company acquisition, the aim is to identify the risks inherent in the tax activities of the company to be acquired, which may affect the value of the company. The financial institution may also request a tax audit prior to disbursing a bank loan, also for the purpose of ensuring that there is no risk of loan repayment in view of any tax risks.
The primary purpose of tax screening is therefore to identify emerging tax risks, but it also aims to identify tax optimisation opportunities and potential savings in business processes.
Tax audits may be comprehensive, but they may also cover only a single type of tax. In addition, tax audits may be conducted on an ad hoc basis or when preparing self-assessments, before preparing reports at the end of the year.
How does tax screening work?
During tax audits, our experts conduct similar investigations at our clients’ premises as tax inspectors do in tax authority proceedings.
Prior to the screening, we review the company’s data available in public databases, then fill out a tax questionnaire during a personal meeting. Based on the information outlined above, the audit begins with the general ledger, analytics, tax returns and tax office current account statements. If necessary, we will examine contracts, invoices and other documentation related to transactions. Upon completion of the work, we identify critical points, make recommendations for correcting errors, and provide support for self-assessments as needed.
What are the advantages of tax screening?
Managing the risks identified during a tax review involves significantly less financial expenditure than if this were done by an official tax audit. If the error is detected by us, the detected tax difference must be paid with interest at the base rate of the Hungarian National Bank, while any omission detected by the Tax Office is subject to a tax penalty (typically 50% of the tax shortfall) and a late payment surcharge.
Why choose us for tax audits?
- Our experts have many years of experience in tax law and accounting.
- Our team is reinforced by colleagues with extensive experience in tax administration.
- Thanks to their experience as tax authorities and tax advisors, our experts have extensive experience in the application of tax law and continuously monitor domestic and EU legal practice.
If you have any further questions on this topic, our experts are available at the contact details below.