THINK TAX
Tax issues and corporate transactions go hand in hand. The main tax challenges to be addressed during an M&A process are to identify potential tax risks regarding the target company, to design an optimized tax structure and to have a clear guidance regarding cross-border investments. Our tax lawyers advise clients on tax matters relevant to their M&A transactions and joint ventures, including majority as well as minority equity investments.
Tax Due Diligence: The main objective of a tax due diligence for a purchaser is to determine the past, present and future tax liabilities of the target company, including disclosed, undisclosed, realized and unrealized tax liabilities. This will help establish the purchase price and the type of tax warranties and indemnities included in the purchase agreement, determine the tax profile of the target company and assist in the development of an appropriate acquisition and funding structure. Our services include reviewing potential risks and opportunities, structuring and financing issues from a legal and tax perspective, reviewing legal agreements and advising on appropriate tax warranties and indemnities. Appropriate legal tax due diligence must be undertaken in conjunction with any financial tax due diligence to ensure that key issues and risks are appropriately identified and assessed.
Tax optimization: In order to obtain maximum benefits for our clients, we provide experienced advice on e.g. structuring transactions, designing sales structures, financing tools and post-merger integration.
Cross-border cases: The growing transparency between countries on taxation information makes an elaborate cross-border tax strategy essential. To support our clients in this aspect, we provide experienced advice on profit repatriation mechanisms, cross-border financing tools and tax structuring schemes to avoid double taxation.
China and Germany for example signed a new Double Tax Treaty (DTT) on March 28, 2014 which came into force in January 2017 and offers Chinese investors in Germany new opportunities for optimizing their tax structures, simplifying administration and saving costs. The new DTT makes the existing tax regulations for potential Chinese investors in Germany more transparent and easier to compare. The DTT is applicable for Germany and Mainland China but does not include Hong Kong. Chinese companies will be able to benefit from a reduction of withholding taxes in Germany through simplified foreign direct investment schemes. Withholding taxes on direct profit repatriations from Germany to Mainland China may be significantly lower than via holding companies in Hong Kong or any offshore jurisdiction because of the new DTT. Other relevant changes affect e.g. the taxing rights on certain capital gains.
