Tax compliance or correct compliance with all tax obligations is an obligation that requires significant efforts on the part of companies. And not only in terms of management, because keeping up to date with all the tax regulations in force at all times requires constant updating.
It is essential to apply good tax compliance to ensure due compliance with all tax obligations in accordance with applicable tax regulations. From the payment of taxes to the filing of tax returns, including the control and mitigation of tax risks that may affect the organisation. Let us not forget that the Capital Companies Act establishes as one of the non-delegable powers of the management bodies the determination of the risk control and management policy, including tax risks. Failure to do so may result in liability for the company’s directors for not applying due diligence.
Advantages of tax compliance
Tax compliance is a management system that facilitates the identification, prevention and detection of tax risks in order to avoid complementary tax assessments, penalties or even accidentally committing a tax offence. Having a tax compliance system in place has significant advantages for the company and even its managers:
- Avoid or minimise the risk of having to pay significant penalties or fines to the tax authorities.
- Improve business reputation. Because appearing on the list of tax debtors can generate mistrust among customers, suppliers and partners.
- Plan financial resources in advance. Acting in advance also makes it possible to avoid mistakes that can be detrimental to the company itself and to optimise the management of its monetary resources.
- The risk of criminal liability for poor control of their tax risks is minimised. Companies can be charged with an offence against the tax authorities if they seriously fail to comply with their tax obligations.
- The risk of a possible subsidiary liability of the directors for the tax debt is limited. Tax compliance is an additional means of proof to demonstrate due diligence on the part of the directors.
How to achieve tax compliance
The UNE 19602 Standard (Tax compliance management systems and requirements with guidance for their use) establishes the key elements that a company must take into account in order to implement a tax compliance system:
- Understand the tax laws and regulations affecting the company and know how to apply them.
- Maintain accurate and up to date accounting to avoid significant alterations in the outcome of the company’s tax assessments.
- Define a timetable of tax obligations with the corresponding deadlines. This will avoid receiving penalties or having to pay interest for late payment.
- Have a tax compliance officer or a tax compliance body in charge of approving and publishing the tax compliance policy and defining due diligence processes with employees, suppliers and business partners. This role can also be performed by an external tax advisor.
- Define a tax compliance policy with commitments and objectives.
- Establish a whistleblowing channel through which employees can report suspected bona fide tax breaches.
- Use accounting and tax management software that complies with the Anti-Fraud Law and allows the automation of accounting processes. It should prevent parallel accounting and the alteration and cancellation of invoices. This will increase efficiency, reduce the possibility of making mistakes and speed up the filing of tax returns.
If your company needs help in implementing a tax compliance system, the tax experts at Confianz can help you develop a tailor-made one.