Keys to a Tax Audit-Proof Business Valuation

At ALS Value, we reaffirm our commitment to technical precision and regulatory compliance in every valuation we conduct. Under the leadership of Dr. Jordi Martí Pidelaserra, Of Counsel at our firm, we have successfully secured the validation of an agreed transaction price by the Tax Administration without adjustments or modifications within the framework of a tax audit. This outcome highlights the importance of rigorous valuation by independent experts in response to tax requirements.

This achievement strengthens our position as a leading firm in business valuation and reinforces our clients’ confidence in our team and financial analysis methodology.

Context of the Procedure

The audit was conducted under Article 37 of the Spanish Personal Income Tax Law (LIRPF), which establishes specific valuation rules applicable to the transfer of unlisted securities.

Valuation Methodology Applied

At ALS Value, we performed a valuation demonstrating that the market value of the company matched the price agreed upon by the parties. To achieve this, we applied a dual approach:

1. Discounted Cash Flow (DCF) Method
   • Income-based approach, relying on cash flow discounting through the projection of financial statements over a 10-year period based on historical data and market outlooks.
   • Application of a discount rate (WACC), calculated according to systematic risk criteria and capital structure, using the CAPM model.
   • Determination of the company's Net Present Value (NPV) by discounting future cash flows and the terminal value, calculated using the Gordon Growth Model and WACC.
2. Market Multiples Analysis
   • Comparison with transactions involving companies in the same sector.
   • Analysis of transaction multiples from comparable companies, obtained from our financial databases (Eikon, Capital IQ, and Pitchbook).

Conclusion

This case demonstrates the importance of applying robust valuation methodologies aligned with current tax regulations. At ALS Value, we remain committed to technical excellence, ensuring that our valuations are not only accurate but also defensible in tax audits and inspections.

If your company requires a rigorous and technical valuation, contact us for expert advice and tailored solutions.

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