More Facts Resolve Tax Risks –

A Case of Skeletons in the Cupboard –

THERE ARE FREQUENTLY whispers in the corridors of power: “Can you believe we did that transaction eight years ago? If the authorities even join all the dots, many eyebrows will be raised and some heads may roll!”

This commentary, no matter how unfounded it might appear, cannot go unnoticed by the tax team and part of a Tax Risk Management strategy process. Nothing is more dangerous than unsubstantiated rumors which have a habit of metamorphosing into new convoluted versions as the years tick on. Confront these transactions. Read More

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Forgetting to Clean Up Afterward –

THE POSITIVE PREPLANNED result in the media business sale above, did not result in this case. A major consumer supplier decided to sell an unrelated group company for approximately $300m. The transaction was simple enough. When the business had been sold, all that had to happen was that the holding company had to be deregistered within a five-year period; and the deregistration dividend, in anticipation of the deregistration steps being taken, could be declared to the parent group, exempt of dividend tax. As simple as that! Read More

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The Media Company Business Sale

AFTER YEARS OF mergers and acquisition involving a number of media-related companies, a dominant holding company emerged. The final step involved is the sale of the main business, with a cash injection into the holding company’s business. The plan was then to distribute the capital profit of the family of companies up to the ultimate holding company, where the funds were required to fund a new series of acquisitions. This meant that dividends had to be declared to the ultimate holding company. Provided that the indirect subsidiary company selling the media business and the various intermediate subsidiary companies fell within a group of company’s structure, where the Read More

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Legitimate Expectations Again! –

“In English law, the concept of legitimate expectation arises from administrative law, a branch of public law. In proceedings for judicial review, it applies the principles of fairness and reasonableness to the situation where a person has an expectation or interest in a public body retaining a long-standing practice or keeping a promise.”

Source: Wikipedia

AS ALREADY DEFINED in the “Tax Risk Management Dictionary” at the beginning of this special report, legitimate expectations are a close relative of taxpayers’ rights. So often Read More

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Taxpayers’ Rights –

IN LINE WITH the fundamental rights which often exist in favor of taxpayers through information and administration legislation in various jurisdictions, taxpayers can expect the IRS to be totally transparent in what they are doing in conducting an investigation into a historical transaction, insofar as it may affect another taxpayer. Usually a taxpayer cannot approach the IRS and ask them to provide information about another taxpayer. But a taxpayer can expect the IRS to be totally transparent on any investigation into its own affairs. Taxpayers would be well within their rights to ask the IRS, at the time that they commence any audit of any transaction, what information they already have at their Read More

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With Hindsight Mistakes Are Easily Fixed with Facts –

WHAT COULD HAPPEN is that the mistake picked up by the IRS is one that can so easily have been fixed had the mistake been identified soon enough. In payroll tax risk areas the mistake is often made that the employment agreement fails to reflect, in writing, new salary arrangements implemented by the salary administration department. All that remains to be done is the systematic resigning of addendums to the original employment agreements to give effect to the clear intentions between employer and employee.

Many companies at this point, by virtue of pressure from their boards of directors, who up Read More

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Why Do Transactions Go Wrong? –

BY WAY OF introduction, these are some of the principles that taxpayers must be made aware of and know in order to approach any complex investigation by the Revenue into any transactions.

Any audit by the IRS must be prefaced by a fundamental question asked by the BO/CFO and the CEO in the taxpayer entity: “What is the business’s internal tax strategy?” From various surveys that have been conducted, it is clear that the majority of the survey participants do not have a tax strategy. The majority of the participants also do not discuss Read More

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Where Does Transactional Tax Risk Come From?

TRANSACTIONAL TAX RISK entails assessing the tax risks associated with the various steps taken in major transactions by businesses. Some of the most obvious tax risks are the tax antiavoidance provisions in tax legislation, “connected persons,” controlled foreign entity legislation, transfer pricing, and simulated transactions. But there are many more. The more unusual the transaction, the greater the tax risk. Typical transactions that require the facts to be carefully collected and subjected to a legal and tax audit include acquisitions, mergers, demergers, management buyouts, and structured finance deals. Often much effort goes into planning a transaction, but then there is lack of attention to detail in the Read More

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THIS IS THE single most important factor in eliminating tax risk into the future and eliminating the tax risks of the past. Get to the bottom of all the facts.

If they don’t exist anymore, go and find them from a person who can give you a clear statement about what happened in the past — but get the facts.

With a clear set of facts, the law can be meticulously checked and applied to the best advantage of the taxpayer. Tax risks can be accurately determined, and a strategy can be devised to minimize the exposure. Read More

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Introduction

IN CHAPTERS 1 to 4, executing a proactive tax risk management plan, with the tax team following a Tax Risk Management strategy, and the tax manager ensuring that he or she is accessing maximum external input, outside his or her ivory tower, the necessity for more facts becomes increasingly evident. This chapter deals with Tax Risk Management Step 5 and those “more facts!”

Lack of facts, facts, and more facts often leads to bad tax compliance and unnecessary mistakes that could have been avoided. Getting to the bottom of the facts takes time and Read More

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Executive Summary –

TAXPAYERS NEED TO be in possession of the facts surrounding any transaction that a business is entering into. If the facts are not readily available, go and find them! It is no misconception that the nature of transactions varies considerably from the time of inception until they are signed off and finalized. The opinion that is often obtained at the inception stage should always be used as a guiding factor. However, due to the intricacies of many transactions, the opinion obtained may only be relevant in part with respect to the end result. Read More