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Share Purchase Agreement Seller Friendly

From the buyer`s point of view, the purpose of both documents is to predict the situation of the purchase of the business and, subsequently, it appears that his tax treatment prior to the transactions was wrong. In this case, the company may be held responsible for underpaid taxes, interest (which can be high, especially when a tax audit reveals tax errors made a few years earlier), or even additional penalties. A tax file provides for situations in which the seller`s liability for the company`s underpaid tax can be triggered, for example. B in the case of a tax check with the company that covers certain taxes or tax matters, or the challenge to the amount of tax not paid by a tax authority or the refusal of a tax authority to grant a refund of VAT to the company, etc. When a SPA is accompanied by a tax deed, it is clearly indicated, in the event of a particular event, how it should be managed and how parties should cooperate when a tax dispute arises with the tax authorities, for example. B which of the parties will settle the dispute. The other issues agreed in a tax deed may be to keep the other party informed of the status of any case that may influence its financial accounts related to tax guarantees, provisions relating to the acquisition and counting of the costs of these cases, or formal appeal decisions. In addition, the parties may decide to include a compensation clause in a tax notice and not the associated GSB. The guarantees and assurances provided by the seller are intended to ensure that the company has, in general, fulfilled its tax obligations in accordance with the rules in force. In theory, it may seem sufficient for the buyer to prove that the seller does not respect the general guarantee that the company has calculated and paid, as required by tax rules. This exercise note is part of the Share Purchase Transaction toolkit. Another method to protect the buyer`s interests is the so-called compensation clause, which is normally used in a share purchase agreement when the due diligence examination reveals irregularities in the company`s tax treatment.

For the buyer, it is less difficult to make claims against the seller under an agreement with such a clause than on the basis of guarantees. In the case of a security application, the buyer must prove that the seller breached the warranty and prove that the buyer was not aware of the breach and that he suffered damage as a result of the breach. In this case, the success of the debt may depend on the establishment of specific provisions of the share purchase agreement. Given the nature of the compensation clause and the fact that the benefits to the compensated party are substantial, the use of the clause is limited to specific cases defined in the share purchase agreement, i.e. the impact of which results from the reported events and refers to the taxes covered in the contract, the maximum liability of the purchaser being strictly limited to a certain amount (if the parties have agreed to such an amount) with respect to an event and/or any declared event. Given the pace of changes introduced in both Polish and international legislation, the evolution of judicial decisions and inconsistencies in the decisions of the tax authorities, appropriate guarantees and compensation clauses covering the company`s tax accounts should be among the buyer`s priorities when negotiating the SGT`s terms and conditions.