M&A Tax - InCorp Advisory

Q: What are the tax implications from a buyer's perspective in case of acquisition of the entire business?

In the case of a slump sale, the tax losses are not transferred to the transferee entity. Also, the credit in respect of minimum alternate taxes is retained with the transferor company.

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Overview

In today’s globally connected world, companies want an effective way to boost their business operations. Companies are seeing acquisitions and consolidation as a quick and effective growth strategy. Whatever type of transaction you are contemplating—an acquisition, disposition, merger, joint venture, IPO, restructuring, or refinancing—your tax obligations must be carefully assessed and your cash flows optimized. Our extensive global network of M& tax and regulatory practice endeavors to combine its rich international experience and expertise in domestic laws and regulations to devise innovative structures for M&A. Our tailored approach to your transaction will provide you with the right balance of functional, regional, and industry expertise on each transaction.

Service Areas Within M&A Tax Services

Our M&A tax team handles ideation and implementation of M&A deals with respect to the following:

Acquisition/divestment structuring
Corporate restructuring: merger, demerger, business/asset sale
Capital reduction, buyback, balance sheet right-sizing
Inbound or outbound acquisition, sale of shares/business.

Frequently Asked Questions

What are the important tax provisions relating to amalgamation?

Whenever there is an amalgamation, the accumulated losses and unabsorbed depreciation of the amalgamating company shall be deemed to be loss or, as the case may be, allowance for the unabsorbed depreciation of the amalgamated company for the previous year in which the amalgamation was effected.

What are the tax implications from a seller's perspective in case of acquisition of the entire business?

In case of a slump sale, the seller is liable to pay tax on gains derived on the transfer of the undertaking at the prevailing tax rates based on the time for which the business undertaking has been held.

What are the tax implications from a buyer's perspective in case of acquisition of the entire business?

In case of slump sale, the tax losses are not transferred to the transferee entity. Also, the credit in respect of minimum alternate taxes is retained with the transferor company.

What is the tax treatment in respect of expenses incurred on amalgamation?

The transferee entity is allowed a deduction for the expenditure incurred wholly and exclusively for the purpose of amalgamation equally over a period of five years starting from the year in which the amalgamation takes place.

Is the transferee entity eligible for any tax holidays?

Where the transferor entity is eligible for any tax holidays, the continuity of those tax holidays in the hands of the transferee entity is usually maintained on an amalgamation. However, in some prescribed exceptions, Income tax law provides that the tax holidays will not be continued on an amalgamation.