Structuring Carve out Agreements and Regulatory Filing Schedules Globally
Executing cross-border carve outs requires synchronizing local asset deeds, regulatory approval schedules, works council consultations, and TSA sunset mechanics.
Transfer of Going Concern
Meaning
Statutory tax provisions in asset purchase transactions treat the transfer of an operating enterprise as an ongoing business, exempting the transaction from value added tax. Transaction counterparties structure an asset deal as a transfer of going concern to eliminate heavy immediate indirect tax payments on transferred property and inventory. Legal status requires the buyer to continue operating the same business enterprise without structural interruption after closing.
Legal exemption applies strictly when all essential operational assets and contracts move as a single operational unit.
Vat Exemption
Indirect tax exemptions prevent severe short-term cash flow burdens during asset acquisitions. Qualifying for a transfer of going concern status allows buyers to purchase business assets without financing upfront value added tax payments. Transaction documents must contain explicit tax declarations to preserve this exemption.
Operational Continuity
Continuity of operational activity forms the core requirement for statutory indirect tax relief. Under a transfer of going concern framework, buyers must carry on the acquired business model using transferred equipment and key personnel. Immediate liquidation or drastic change of business model invalidates the tax treatment.
Clawback Exposure
Tax authority audits evaluate post-closing business operations to verify ongoing compliance. If a transfer of going concern classification is rejected by revenue authorities, buyers face retrospective value added tax assessments plus interest charges. Tax indemnity clauses require sellers or buyers to reimburse tax shortfalls based on fault allocation.