Tax Compliance

Considering the increasing regulation, it is becoming more difficult to keep track of and comply with all the laws and guidelines related to taxes. Tax Compliance as part of risk management helps maintain the tax honesty of businesses and individuals.

In the economic context, the term Compliance is understood as ethically correct and rule-compliant behavior. Tax Compliance is usually just a part of risk management or the compliance functions in a company.

What is Tax Compliance?

Tax Compliance refers to all organizational measures that serve to comply with tax regulations and requirements. Tax Compliance is intended to ensure the timely and complete payment of all taxes, duties, and levies. Essentially, Tax Compliance thus serves to promote the honesty of the taxpayer.

Tax Compliance through Control System

Compliance activities, including Tax Compliance, are the responsibility of the board of directors. Especially in larger companies, however, Tax Compliance is usually carried out by a separate team. This team has the task of implementing and monitoring a control system, which ensures compliance with tax regulations. As part of the control system, the control objectives, quality requirements, risk factors, analysis processes, and review methods must be defined. The responsible persons must not only specify which taxes are to be paid in what amounts but must also adequately monitor and document all relevant processes. However, the term Tax Compliance does not simply mean the blind payment of levies. Rather, the responsible individuals as part of their activity should also undertake intelligent tax planning or optimization and reduce the financial burden within the limits of legal requirements to a minimum.

Tax Compliance Saves Costs

Although the introduction of a Tax Compliance system involves initial costs for companies, the implementation of an intelligent control system is worthwhile. If tax regulations are violated, high fines threaten, regardless of whether the violation was intentional or accidental. By efficient control, Tax Compliance helps prevent penalties and protect companies from negative consequences. This not least because being accused of tax evasion or tax fraud is usually also associated with considerable reputational damage.  

Findea helps you keep your taxes simple and hassle-free.