CIMA F3 Syllabus D. Business valuation - Taxation implications - Notes ^{5 / 7}

In some countries

It is possible for an acquiring company to offset past losses of an acquired subsidiary against the present profits of the parent company. 

However, in certain countries (eg the UK), there are stricter tax rules that prevent this.

In cross-border acquisitions

The impact of the acquisition on the acquirer's tax bill will need to be considered. 

For example an entity may try to exploit differences in taxation rates by merging with an overseas company and re-incorporating in a low tax regime, eg Ireland.

The impact of withholding tax on certain types of incomes from an overseas branch will have to be carefully assessed, although the impact of this is reduced if a double taxation agreement between the two countries is in place as double tax treaties help avoid double tax payments when acquisitions/mergers occur across different countries with different tax rates.