Tax due diligence is the systematic review of a target's tax position before you buy it. Its purpose: to identify, before signing, the hidden liabilities a Romanian company carries with it — undeclared obligations, latent adjustments, pending files — that become the buyer's cost after closing. Where it is done properly, the "bomb" is found before signing, not after.
Tax due diligence is the systematic verification of a company's tax position before you acquire it or invest in it. The goal: to identify, before signing, the tax liabilities and hidden risks — undeclared obligations, incorrect practices, open files — that can become costs after takeover.
It is not a financial audit (which confirms that the financial statements reflect reality), but a tax-risk analysis: what the State can claim, for which period and with what probability. Its output is not a compliance opinion, but a map of the exposure you buy together with the company.
In a share acquisition, you buy the legal person as it is — with its tax history included. Changing the shareholder does not erase the company's past: the obligations remain the company's, and ANAF, the Romanian tax administration, can assess them retroactively for the entire open period. The general rule: the right to assess tax claims lapses in 5 years, a term that begins to run from 1 July of the year following the one for which the obligation is due. In practice, you also buy the risk of an audit over the open period, with a tax assessment issued to the company — that is, economically, to you.
More than that, some obligations can also be pursued outside the company: the Fiscal Procedure Code governs joint liability. That is why "the company has no arrears" does not mean "the company has no risks". Nor do reorganisations clean the past: in mergers and demergers, tax obligations are not extinguished but pass to the successors. The practical conclusion: tax risk does not evaporate through a change of owner or of legal form — it must be identified, quantified and allocated contractually.
The review is not a ticking-off of documents, but a reconstruction of the target's tax positions over the open period. Serious due diligence covers, at a minimum:
The consistency between returns, accounting records and actual payments; obligations declared but unpaid; rescheduling arrangements in progress.
Ongoing audits, compliance notices, anti-fraud checks, pending challenges and tax litigation.
Contracts with sole traders or "collaborators" that conceal employment relationships; management fees and intra-group services without substance.
The existence and quality of the file, the latent adjustments on transactions with related parties.
Risky deductions, VAT correctly collected, transactions with a risk of missing-trader fraud in a chain.
Expenses deducted without economic justification, provisions, transactions with related parties.
Ongoing proceedings, amounts challenged, guarantees lodged, the risk of enforcement.
Tax clearance certificate, garnishments, seizures, State aid with clawback clauses.
The most costly risks are those that do not appear as liabilities in the accounting records: they are risks, not obligations already assessed. They cannot be found by reading the balance sheet, only by reconstructing the tax reasoning behind each significant operation.
A weak or non-existent file on large intra-group transactions is an adjustment waiting for an audit.
VAT deducted on acquisitions without a right of deduction, which will be rejected at audit.
Loans without a market interest rate, services invoiced without substance — classic sources of adjustment.
The company has not recognised in its accounts a risk that, in reality, it knows about.
Sole-trader "collaborators" treatable as employees, with contributions and interest retroactively.
Environmental, payroll and contribution debts — not strictly tax, but they strike the same company and can block the same transaction.
In a share deal, hidden tax risk does not disappear at signing — it shifts onto the buyer's shoulders, through the company. The tax clearance certificate shows only the obligations already assessed and recorded, not those a future audit can assess for the open period. Without due diligence to quantify that risk, and without clauses allocating it to the seller (representations and warranties, indemnity, escrow), the buyer pays twice: once the price of the company, a second time the liability it did not see.
Tax risk is not described only qualitatively; it is quantified. The practical formula: probability × impact. The impact is the potential amount (principal obligation, interest, penalties); the probability turns on the strength of the tax position and on audit practice. Good due diligence also sets a materiality threshold and ranks the risks: those that can stop the transaction, those that justify a price reduction or a guarantee, and those accepted as they stand. Once quantified, the risk is negotiated.
By the (weighted) value of the identified risk.
The seller warrants the tax position and is liable if it proves otherwise.
The seller bears an identified risk, if it materialises after closing.
Part of the price remains held by a third party until the risk period passes.
Certain risks must be remedied before the transaction closes.
The way the transaction is structured decides which tax risks transfer — which is why the structure is decided after due diligence, not before.
You buy the whole company, with all its obligations, known and unknown. The historic tax risk transfers in full, through the entity. Advantage: simplicity, continuity of contracts and permits. Disadvantage: you inherit the entire past.
You buy only certain assets (and, possibly, expressly assumed liabilities). You can isolate the historic tax risk with the seller. Disadvantage: it has its own tax treatment (VAT, transfer taxes) and requires checking the encumbrances on the assets — mortgages, pledges, seizures, garnishments.
Even outside the company, the Fiscal Procedure Code governs joint liability (arts. 25–26): in defined circumstances — for instance, the takeover of assets from a debtor under common control — one person may be liable for the tax obligations of another. A recent correction matters: through Decision no. 49/2025 (delivered on 18 February 2025, published in March 2025), the Constitutional Court found the unconstitutionality of some of the criteria in art. 25(3)(b) and (c), for lack of precision and foreseeability. The effect for a buyer: the joint-liability analysis must be conducted on clear criteria, and structuring the transaction becomes a real risk-management tool. The tax detail of moving assets links to the relocation regime and exit tax, and the overall architecture to structuring the group and choosing the holding.
The result takes the form of a report containing: a description of the tax position reviewed; the list of risks, each with a quantification (impact × probability); the "red flags" — the major risks that can block or re-price the transaction; recommendations for allocating the risk (price, guarantees, escrow, indemnities); and, where appropriate, possible remedies. Each quantified risk is a position at the table. A good report tells the buyer not only "what is wrong", but "how much it can cost you and how you protect yourself" — and sometimes the most valuable paragraph recommends a second opinion before a major decision.
In an acquisition, the tax expert and the M&A lawyer play complementary roles. The expert identifies and quantifies the risk — reads the files, redoes the calculations, assesses the latent adjustments. The lawyer translates the risk into contractual architecture — representations and warranties, indemnities, escrow, conditions precedent. Where the same person holds both qualifications — lawyer and tax adviser — the bridge between the two is built without loss in translation. And due diligence does not end at signing: after closing comes integration — correcting the identified risks, monitoring the warranty period and, if a risk materialises, triggering the indemnity or the escrow. A risk identified and remedied quickly costs a fraction of what it would cost if ANAF discovered it, at an audit, two years later.
No. The certificate shows the tax obligations already assessed and recorded at the date of issue. It says nothing about the risks a future audit may assess for the open period — precisely the hidden risks that due diligence looks for. A "clean" certificate can coexist with latent adjustments running to millions.
A share deal transmits the company's tax history in full; an asset deal allows that history to be isolated with the seller, but has its own tax cost (VAT, transfer taxes) and requires checking the encumbrances on the assets. The choice depends on the size of the historic risk identified and on the commercial objectives — which is why the structure is decided after due diligence, not before.
Economically, the buyer — because the company (the same legal person) receives the tax assessment. That is why contractual allocation of the risk to the seller (representations and warranties, indemnity, escrow) is essential: without it, the buyer bears a liability generated before it owned the company.
It depends on the size of the company, the complexity of the transactions and the period covered. Measured against the risk it prevents — an adjustment of hundreds of thousands or of millions over the open period — the cost of due diligence is almost always a fraction of the exposure avoided. It is a prevention cost, not a compliance cost.
Informational material, updated 18 July 2026. It does not constitute legal or tax advice; individual situations must be analysed case by case.
An initial review maps the target's tax exposure over the open period and shows how it can be allocated — through price, representations and warranties, indemnity or escrow — before the assessment lands on the company you now own.