Research On The Response To The Tax Risk Of The Target Company By Acquirer

Under the background of the mixed-ownership reform,there are more and more cases of state-owned enterprises acquiring private enterprises.In the practice of “M&A”,we found that the private target companies usually have more tax risks,The misuse of tax laws and regulations and tax incentives have led to the phenomenon of underpayment.What's more,malicious evasion of taxes has laid a hidden danger to the daily operation and capital operation of enterprises.As a professional investment platform for state-owned enterprises,G Company enters the water environmental protection field through investment mergers and acquisitions,subject to the restrictions on the transfer of public utilities franchise,and G Company can only acquire the equity of the target company.Under this situation,the problem of tax legacy of the target company will inflate the cost of the acquire;after the completion of the equity delivery,the potential tax risk of the target company will also be transferred to the acquirer.In addition to evaluation value,the tax risk of the target company becomes the most critical factor in determining the success of an equity merger.Based on China's current taxation legal environment,this paper focuses on how to identify the tax risks of target companies under the equity merger and acquisition model,reasonable adopt coping strategies,reduce and control the tax risks,and promote equity mergers and acquisitions.Firstly,based on the literature review,the tax risk of the target company and its impact on equity mergers are clearly defined.This paper analyzes the causes of tax risks in private enterprises and proposes strategies to reduce the tax risks,and optimizes “M&A” tax environment from the source.Secondly,analyze the case of G state-owned companies' merger and acquisition of ZK private enterprises,and introduces the main tax laws and regulations and preferential policies applicable to ZK enterprise,and identifies the main tax risks of ZK.Summarizes the countermeasures G Company has taken for different tax risks,to resolve,reduce and assume the tax risks of ZK.In the end,the equity acquisition agreement was reached on the basis of the controllable tax risk.The author summarizes the tax risk response measures for the target company through equity mergers and acquisitions practices:(1)At the beginning of the merger,it's necessary to implement detailed tax due diligence on the target company to find and identify potential tax risks as much as possible by professional teams;(2)To conduct detailed assessment and judgment on the tax risks of the target company.Industry expertsand professors may be hired to conduct analysis,demonstration and reassessment the important risk;(3)For different risk causes,adopt reasonable use of tax incentives,pay taxes,communicate with local governments and tax authorities,reduce and control risks;(4)When signing the equity transfer agreement,take measures as jointly managed account,installment payment,and performance bond to prevent risks;(5)The original shareholder may be required to retain a minority share,or take “8+2” step-by-step acquisition model,If the target company has potential tax risks,It is clearly stipulated in the equity transfer agreement that the original shareholder assumes the responsibility for the tax risk before the delivery of the target company and reasonably protects the rights and interests of the acquirer.The conclusions of this paper have positive significance for improving the success rate of equity mergers and acquisitions,and can also provide valuable reference for other state-owned enterprises' “M&A” activities.