CPABC in Focus May/June 2016 | Page 36

“The existence and nature of any unrecorded tax liabilities can significantly affect the investment risk (and therefore the value) of a business, substantially altering the landscape in which the negotiation of a sale and purchase agreement takes place...” In owner-managed business situations, it’s common for a target company to engage its key management and sales personnel on a contract basis. There’s a risk in doing so, however; the CRA could consider such personnel to be employees of the company, thereby triggering withholding tax liabilities for EI and CPP contributions. In practice, the CRA may refrain from reassessing the amount of income tax the employer failed to deduct; however, the CRA is not bound to do so, which means it is entirely possible for a target company to be reassessed for additional income tax deductions as well. In short, it’s important to obtain a clear understanding of how a target company has enlisted its key management and sales staff in order to assess the risk of additional taxes payable that may arise if the CRA conducts a review post-acquisition. A final word of caution These are just a few of the common Canadian corporate income tax issues that may arise during the due diligence process prior to a business acquisition. Those looking to make an acquisition of a taxable Canadian corporation should consider carefully the tax implications of such a transaction and the inherent tax attributes of the business—so, too, should Canadian owner-managers who may be planning to sell their businesses. The existence and nature of any unrecorded tax liabilities can significantly affect the investment risk (and therefore the value) of a business, substantially altering the landscape in which the negotiation of a sale and purchase agreement takes place; the result could be the need for additional holdback provisions, income tax indemnification clauses, and other similar contractual arrangements. The 2016 GLE. Make the best of every ground. Total price starts at $66,360.* ©2016 Mercedes-Benz Canada Inc. CPABC members receive a fleet discount. For more information, call Randall DesBrisay at 604-351-5290 or email [email protected] Mercedes-Benz Vancouver 550 Terminal Avenue, Vancouver | D#6276 Mercedes-Benz Boundary 3550 Lougheed Highway, Vancouver | D#6279 Mercedes-Benz North Vancouver 1375 Marine Drive, North Vancouver | D#6277 Mercedes-Benz Richmond 5691 Parkwood Way, Richmond | D#6278 ©2016 Mercedes-Benz Canada Inc. Shown above is the 2016 GLE 350d 4MATIC™ with optional Sport package, optional LED Intelligent Lighting System and optional Wheels. MSRP of advertised 2016 GLE 350d 4MATIC™ is $63,200. *Total price of $66,360, includes freight/PDI of $2,395, dealer admin fee of $595, air-conditioning levy of $100, PPSA up to $45.48 and a $25.00 fee covering EHF tires, filters and batteries. Vehicle options, fees and taxes extra. Vehicle license, insurance, and registration are extra. Dealer may lease or finance for less. See your authorized Mercedes-Benz Vancouver Retail Group dealer for details or call Randall Desbrisay at 604-351-5290. Offer ends May 31, 2016.