Before an acquisition, a capital contribution or a project transfer, the buyer needs to know the target’s real value and its hidden obligations. Financial due diligence (FDD) and tax due diligence (TDD) are the two core components of that step.
Financial Due Diligence
| Area reviewed | Question it answers |
|---|---|
| Quality of earnings | Is reported profit sustainable? How much comes from non-recurring items or related-party transactions? |
| Net debt | Borrowings, finance leases, off-balance-sheet obligations and debt-like items to be adjusted in the price |
| Working capital | The normalised working capital level underpinning the post-completion adjustment mechanism |
| Contingent liabilities and commitments | Disputes, guarantees, investment commitments and unrecorded obligations |
| Cash flow | Actual cash generation compared with accounting profit |
Tax Due Diligence
| Tax | Common exposures |
|---|---|
| Corporate income tax | Non-deductible expenses; incentive conditions not fully maintained; loss carry-forward |
| Value added tax | Input credit conditions; refunds; invalid invoices |
| Personal income tax | Taxable income of expatriates; untaxed benefits |
| Foreign contractor withholding tax | Contracts with foreign contractors not declared, or declared on the wrong basis |
| Transfer pricing | Missing related-party documentation; pricing policy not demonstrably arm’s length |
Deliverables
- A bilingual Vietnamese–English report structured by risk area
- Quantified exposures where estimation is possible, with the assumptions and basis of calculation stated
- Recommended contractual mechanisms: price adjustment, escrow, representations and warranties, and indemnities
- A list of items to clarify with the seller
Scope and responsibility: the due diligence report is prepared from documents provided by the seller within the agreed scope and timeframe; it is not an audit and expresses no audit opinion. Tax exposures are presented with their legal basis and an assessment of the likelihood of challenge by the tax authorities; the transaction decision rests with the investor. The report is for the commissioning party and the stated purpose only.
Confidentiality: a due diligence file contains sensitive business data belonging to both buyer and seller. We perform the work under a separate confidentiality agreement, with role-based access control and activity logging across the entire file.
