A family-owned company was subjected to a tax audit focusing on longstanding intercompany balances related entities. Following the audit, the company was assessed additional taxes together with penalties and surcharges, creating uncertainty for management and exposing the group to a significant financial liability.
The challenge
The tax authorities had raised concerns regarding the nature, treatment and supporting documentation of certain intercompany balances accumulated over several years. The resulting assessment included additional tax adjustments as well as substantial penalties and surcharges.
Our approach
- Performed a detailed review of the audit findings, supporting documentation and historical intercompany transactions.
- Worked closely with management to understand the commercial substance and background of the balances under review.
- Identified areas where additional clarification and supporting evidence could be provided to the tax authorities.
- Prepared technical and factual representations addressing the issues raised during the audit.
- Engaged constructively with the tax authorities to facilitate discussions and seek a practical resolution to the matter.
- Assisted management throughout the negotiation and settlement process.
Outcomes
Through proactive engagement and a collaborative approach with the tax authorities, the matter was resolved amicably without the need for prolonged dispute proceedings.
The client obtained certainty over its tax position, significantly reduced the uncertainty surrounding the assessment and was able to move forward with greater confidence. The process also highlighted opportunities to strengthen documentation and governance over intercompany transactions, reducing the risk of similar issues arising in the future.
This engagement demonstrates the importance of obtaining timely professional advice when responding to tax audits and assessments, as constructive dialogue and well-supported representations can often lead to more efficient and commercially practical outcomes.
