Stock Purchase Agreement Tax Provisions

Ultimately, the tax provisions contained in a sales contract can significantly alter the buyer`s return on investment. As a result, a buyer should try to position their tax and legal advisors so that they can help the buyer protect their investment and maximize their return. If the share purchase agreement contains an exemption clause, the occurrence of a particular event leading to the seller`s liability constitutes a sufficient basis for the buyer`s right. Such events may include, for example, the adoption of a decision on the fixed estimate of the amount of tax paid too little and the resulting obligation to pay the tax, without the buyer having to prove other circumstances of the event. With regard to taxes: in the first tranche of an occasional series on tax issues in share purchase contracts, we discuss the provisions of a share purchase agreement regarding the pre-closing taxes of the target company. In order to best protect against existing or past tax arrears of the acquired business that have been accumulated prior to the acquisition, the buyer will generally endeavor to obtain from the seller certain guarantees and/or indemnities in tax matters. As noted above, general tax liabilities are generally included in the definition of working capital. Therefore, once working capital is established at the balance date, all tax liabilities of the target to be paid within one year (which should cover all additional taxes due in a period prior to the financial statements) should be included under the heading “taxable taxes” of the working capital calculation. As a result, these tax obligations effectively reduce the final purchase price that the buyer has to pay to the seller. [3] It is this rather discreet method that takes into account the pre-closed taxes expected of a target company in many Canadian share purchase contracts. If you are involved in the purchase of a business as a buyer or advisor to a buyer, I can help you analyze the tax history of the objective and design the necessary tax provisions in the sales contract to protect your investment. Tax compensation is a promise to pay for taxes incurred that are contrary to the agreement of the parties, which are usually included in tax returns and warranties….

Comments are closed.

female viagra