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Companies that overlook state and local business tax issues when making foreign acquisitions run the risk of derailing the entire M&A process, warns top ten US accountancy firm CliftonLarsonAllen, a member of Nexia International.

US state and local taxes are the biggest tax issues likely to threaten the foreign acquisition of a US company. Yet this experience is not exclusive to the US and has important lessons for M&A worldwide.

If a target company has not met its state and local tax requirements, this will have a significant impact on its earnings and balance sheet. The buyer may decide it paid too much for the target or the return on investment may be less than expected C especially if the buyer is also saddled with the tax liability, says Craig Arends of CliftonLarsonAllen.

Unrecorded tax liabilities can become the responsibility of the buyer, even if the liability relates to periods before the buyer took ownership.

US audits of state and local taxes can often take three to five years. By the time a tax assessment is issued the funds to cover a liability may no longer be escrowed, explains Arends.

1.    There are some websites available which are useful for doing business in China.

--State Administration of Taxation
--Ministry of Commerce of the Peoples Republic of China
--State Administration for Industry and Commerce of Peoples Republic of China
--The Chinese Institute of Certified Public Accountant
--Beijing Institute of Certified Public Accountant