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Alinga Consulting Group was founded in 1999 by a small, international team of professionals that had been working in the Russian market since 1992. As foreign investment has increased demand for professional accounting and audit services, and as growing companies now require outstaffing and HR documentation services, Alinga has kept pace with a range of solutions for business in Russia. As a member of such organizations as IGAF, AmCham Russia, AEB, and the Moscow Audit Chamber, Alinga takes customer service as seriously as it takes the accuracy of its services. The Rough Guide to Tax Due Diligence and how Alinga Consulting Group can help By Galina Belikova, Director Audit and Tax Department     About the Author Galina Belikova, Director  Audit and Tax Department   Galina Belikova graduated from the All-Russian State Tax Academy with an economic degree, specializing in accounting and audit. She is also qualified as a lawyer, having graduated from the Moscow Academy of Finance and Law, with a specialization in jurisprudence.   Ms. Belikova is a certified auditor. In 2009 she received the DipIFR certificate as a specialist on International Financial Reporting.   Ms. Belikova has also held the rank of tax service adviser of the third order with the Russian Tax Office. Before joining the Alinga Team, Galina worked for such companies as Eleks-Polus (part of the carmaker LADA) and the audit firm Константа.   Follow Alinga:   Also on our Site: IFRS As A Tool For Due Diligence Financial Due Diligence For M&A in Russia Financial And Tax Reporting For Corporate Mergers Thin Capitalization And Controlled Debt: Taxation And Legal Issues   Alinga Consulting Group +7 (495) 988-21-91 consult@acg.ru     Tax Due Diligence is an essential tool for checking the financial condition of a company and determining the degree of tax risk that it may carry.   When a company is purchased, the purchaser becomes its legal successor and responsible for the acquired company's obligations, including tax obligations. The purchaser may be held liable, even criminally liable, for any substantial additional tax obligation revealed by future tax audits. Before purchasing, the target's financial state must be carefully assessed.   The main objectives of Tax Due Diligence are the following: Check the validity of tax accounting and payments;  Check the validity of any tax deduction used; Check whether tax declarations were submitted on time;  Check how tax liabilities were reported in the accounting records;  Detect tax risk;  Assess tax obligations.   In short, Tax Due Diligence is a group of procedures intended to detect, evaluate and help eliminate a company’s probable tax risks for the investor. Tax Due Diligence helps reveal the true value of the target, as high tax risk can lower the value of the target. Tax Due Diligence also provides a foundation for future tax planning for the acquired target and parent company.   To do this, the following are reviewed during Tax Due Diligence to make sure they correspond with legislation and regulations: The internal accounting policy; The documentation and substance of the tax accounting; The calculated tax base, applied tax deductions, and calculated tax due.  Individual recorded transactions and if they were appropriately classified.   To do this, Tax Due Diligence uses both external and internal sources of information.   External sources include: Data from official sources (such as the data base of the Unified State Register of Legal Entities); Data received from the company's contractors.   Internal sources include: The primary accounting documents, accounting registers and tax ledgers; Information received from company employees; A physical inspection of the facilities and fixed assets.   Additionally, tax risks can be evaluated from the possible point of view of the tax authorities or from the point of view of the court that will review the tax dispute. As a general rule, the tax authorities pose more of a tax risk than the court, since the court reviews tax disputes more objectively than the tax authorities. However, taking the tax authorities' claims to court can be a greater draw on company resources – so understanding the tax risks from both points of view is important in understanding the true potential cost of the risk.   When purchasing a company, a wise investor will evaluate the deal in terms of cost and risk, including tax risk. Tax Due Diligence is a tool that helps investors determine and assess these tax risks.