Tax Shield

The tax shield (English, in German: tax shield ) is a term used in the financial industry. The tax shield is the value that contribute to borrowing costs, liabilities or losses to the enterprise value.

Since companies can use debt or losses tax deductible in most tax systems, increase these negative per se financial measures a company's value for a potential buyer, which can be offset against profits. If a company is in accordance with debt or perpetuate old losses in its balance sheet, its market value by exactly the amount of tax benefit is higher than the value of the Company who is not in debt.

For this reason, insolvent or no longer active active corporate coats nor the destination of sales of companies ( mergers & acquisitions) can be.

Distinction

The French term " Bouclier fiscal" uses indeed the same visual comparison, but refers to something else, namely the income tax on individuals.

• Finance
• Tax law