Tax due diligence

Before buying a Latvian company it is wise to carry out a tax due diligence to ascertain that the company’s tax position does not involve material tax risks. Considering that many companies operate on the pan-Baltic basis, having common management and cross-Baltic transactions, in such situations the pan-Baltic tax due diligence is important.

If you are considering to acquire a Latvian company, before deciding on the due diligence it is necessary to consider the following issues.

Scope of the due diligence

Due diligence usually involve the following taxes:

  • VAT
  • Payroll taxes
  • Excise, natural resources tax, customs (depending on the company’s business)
Tax Due Diligence

Materiality of the transactions to be reviewed

Materiality  significantly influences the detail of the work and report and thus also the cost of the work. In practice usually the clients are satisfied with the materiality level amounting to 30 000 or 50 000 EUR per transaction.

Number of the years under review

In general a company is responsible for taxes 3 years retroactively, except for transfer pricing, where the liability stretches 5 years behind.

Full tax due diligence or “Red Flag” report?

Namely, how detailed the results of the report should be. The full due diligence report covers all the procedures performed during the review, while Red Flag report is usually limited to the issues discovered during the due diligence review, describing issue, impact and recommendation, and evaluation of the risk (low, medium or high).

Data room and data processing.

Usually, the information to be reviewed is collected in the virtual data room that allows to ensure full confidentiality. If it is expected the interviews with company’s management are carried out.

Our team will be happy to assist you in the assessment of the target company by carrying out the tax due diligence. Please contact Arturs Breicis for further information by calling +371 29274911 or e-mail: