Tax Compliance: Everything You Need to Know

What is Tax Compliance and Why is it Essential for Your Business?

Since the enactment of the Federal Constitution in 1988, Brazilian legislation has undergone numerous changes. According to the Brazilian Institute of Planning and Taxation (IBPT), between 1988 and 2016, more than 5.4 million norms and laws were enacted, of which over 360,000 are related to the tax system. These numbers highlight the complexity and high tax burden that Brazilian companies face.

What is?

Tax compliance refers to a company’s adherence to tax laws and regulations. The term “compliance” comes from the verb “to comply,” meaning “to act according to the rules.” In a business context, it means fulfilling all tax and fiscal obligations, thereby avoiding errors, fines, and legal issues.

When we talk about Tax Compliance, we refer to processes, routines, and internal actions that ensure the company meets all its tax obligations. This includes compliance with ordinary laws, supplementary laws, decrees, normative instructions, and other tax regulations.

Advantages of Implementing Tax Compliance

Adopting Tax Compliance offers several benefits for companies. Let’s explore some of these advantages:

Early Error Detection

Implementing a program allows for the early detection of procedural errors that could result in tax violations. Preventing problems is always cheaper and less burdensome than correcting them after they occur.

Reduced Costs from Fines and Legal Expenses

Companies in compliance do not face errors or delays in tax payments, avoiding fines and legal expenses. This results in more efficient financial management and fewer unnecessary costs.

Identification of Tax Opportunities

By carefully reviewing all tax obligations, a company can find legal loopholes that allow for savings. This can result in lower tax payments, maximizing tax efficiency.

Increased Value in the International Market

Since the opening of the international market in the 1990s, tax compliance has been increasingly valued. Compliant companies have a competitive advantage in international negotiations.

Priority in Reimbursement Programs

Companies that maintain tax compliance have priority in government reimbursement programs, ensuring greater agility and efficiency in recovering tax credits.

Improved Credibility and Competitiveness

Tax compliance improves a company’s credibility, both internally and externally. This can result in more favorable conditions in credit lines and differentiated treatment in tax audits.

How to Implement in Your Company

Commitment from Management

The success of Tax Compliance starts with the commitment from management. Support from senior leadership is essential to implement a culture of compliance within the company.

Creating an Exclusive Department

Delegating the compliance function to the tax or accounting departments can be a mistake. Ideally, an exclusive Tax Compliance department should be created with full autonomy and impartiality.

Implementation and Training

Implementation involves creating a dedicated team, distributing responsibilities, and providing training. It is crucial that all employees understand the importance of compliance and follow the established norms.

Continuous Monitoring

After implementation, the department should continuously monitor activities, evaluate compliance with norms, and provide detailed reports on the progress of Tax Compliance.

Continuous Improvement

To ensure the efficiency of the Tax Compliance department, it is essential to invest in continuous improvement. This includes regular updates and adopting new practices to maintain compliance.

Responsibilities of the Tax Compliance Department

The main responsibilities of the department include:

• Generating the tax calculation memory.
• Issuing invoices and other tax documents.
• Making accounting entries in the corresponding books.
• Coordinating tax due dates and payments.
• Staying updated with tax legislation.
• Advising other departments on tax matters.
• Controlling tax credits in refund requests and compensation declarations.

Technology as an Ally in Tax Compliance

Technology plays a crucial role in the efficiency of Tax Compliance. Automated solutions help control and monitor tax processes quickly and accurately, minimizing human errors and increasing effectiveness.