Adhering to legal requirements and obligations and systematically and preventively safeguarding the company’s internal policies in the field of taxes is referred to as tax compliance. The tax compliance management system (tax CMS) for organisational implementation of management decisions based on principles, procedures and actions is used to ensure the effectiveness and business transactions of a company.

New standards have been set in tax reporting due to internationalisation of accounting, tax legislation and complexity. Companies are increasingly exposed to the challenge to meet the ever-increasing requirements for the implementation of an effective tax CMS for monitoring tax scenarios in the enterprise.
The scenarios relevant for monitoring mainly include the following:

 

• Identification, the object and evaluation of tax risks for all types of taxes based on the company’s tax objectives
• An appropriate organisational structure and appropriate governance processes that reflect the size of the company and the enterprise- or industry-specific tax requirements
• Adequate documentation and communication of tasks, responsibilities and authorisations on the one hand, and tax processes on the other hand (record-keeping obligation)
• Tangible and timely identification and implementation of legal and/or
• Regulatory changes in tax law or tax accounting
• Identification, the object and evaluation of tax risks for all types of taxes
• Timely and correct tax reporting and tax forecasting
• Accurate calculation, evaluation, classification and disclosure of tax liabilities and tax assets
• Timely payment of tax liabilities, including retention amounts and paying of withholding taxes
• Lodging extrajudicial and judicial remedies
• Accurate and complete calculation of tax provisions
• Efficient and effective fulfilment of obligations to cooperate

 

Risks of a non-functioning tax compliance system

An effective tax CMS ensures the mitigation of the risks listed above and should be in every company’s focus. One essential core element of the effective tax CMS is an enterprise-wide risk management and control system that reflects the systemic principles of the process and legal requirements in an appropriate way.

 

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