7 best practices to track tax compliance and minimize risks

Maintaining tax compliance is a sound business practice, especially at strategic times

Saying that Brazil has a complex and challenging tax system for companies is hardly a surprise. In this scenario, maintaining tax compliance requires a lot of organization and attention to the requirements set forth by the country’s Tax Authorities.

Failure to comply with the obligations can lead to tax deficiency and prevent companies from bidding in auctions and obtaining credit. Not only that, but it may also prevent transactions in which validating the business’s compliance is a requirement.

Can you imagine missing a profitable opportunity once you find out that your company did not comply with an obligation that has been overlooked? Keeping everything in check will save you from surprises like this at the most critical times.

To save the company from loss and outright frustration, it is best to adopt good practices to track tax compliance and minimize risks. Check out seven tips below:

1. Create mechanisms for organization and control

Companies must be in constant good standing at the local, state, and federal levels. To pull this off, they must pay several taxes and file a number of statements. The list of obligations is long and it is essential to keep track of all of them and their corresponding due dates for submission and payment.

Internally, companies must devise ways to manage all those processes, and this requires organization and control of the teams involved in those tasks (tax, accounting, and personnel departments). Defining a schedule of obligations and those in charge of monitoring those procedures is key.

2. Rely on technology to improve management

Using technology adds to the first good practice and brings substantial benefits, especially for larger companies and those with a higher turnover rate, as well as for companies operating with a certain degree of complexity.

Adopting systems that integrate information contributes to the proper management of tax procedures, thus helping to maintain compliance and minimize tax audit risks.

3. Issue certificates on a regular basis

A Certificate of no Overdue Debt (Certidão Negativa de Débitos - “CND”) attests the existence – or lack thereof – of tax and social security liabilities with the tax authorities at the local, state, and federal levels.

Issuing those certificates from time to time allows companies to monitor their tax compliance status and, in a few situations, may even enable taxpayers to take prompt action in case any irregularity is found by the tax authorities.

Check out the main certificates below:

• Joint Debt Clearance Certificate Related to Federal Taxes and Overdue Federal Tax Liability;
• Certificate of Overdue State Tax Liability;
• Certificate of Overdue Local Tax Liability;
• State Labor Court Certificate;
• Federal Court Certificate;
• No Civil Lawsuit Certificate;
• No Criminal Lawsuit Certificate;
• Non-Overdue Liability Certificate of Labor Debts;
• Certificates from Trade Associations;
• State Tax Certificates;
• Local Tax Certificates;
• Liability Certificate in relation to the Severance Indemnity Fund for Employees (FGTS);
• Settlement and Waiver of Protest.

Read more: Non-Overdue Liability Certificates: Why keeping them up-to-date?

4. Schedule reviews

Running a business diagnosis, identifying eventual shortcomings and the room for management improvement is another good practice tip. To carry out a thorough troubleshooting to ensure the good standing of the company, it is worthwhile to perform reviews to assess accounting, tax and labor-related issues.

By repeating this procedure on a scheduled basis, breaches may be detected before they are identified by the tax authorities and lead to major problems. This task should ideally be performed by experts in assessments of this sort.

Read more:

What can tax review do for your company?

Labor and social security review

5. Bring your tax team up to date

To avoid problems caused by misinterpretation and non-compliance of the rules in force, companies should constantly invest in bringing their tax teams up to date with the recent developments in local, state, and federal laws.

The challenge of keeping one's own team trained to deal with this great volume of regulations is one of the reasons that leads companies to consider tax outsourcing.

6. Consider making a spontaneous confession once a breach is found

In a spontaneous confession, taxpayers confess their debts before authorities start an administrative procedure or run audits against them. By doing this, fines and deficiency notices may be avoided.

However, companies will not beneft from this procedure if they have already been audited and a notice of deficiency has been issued. Thus, they must settle any unpaid debts beforehand, according to the rules in force.

7. Promote management integration

When accounting, tax, and labor management is carried out in an integrated manner, specialists from these areas can work in conjunction with each other more easily and with greater efficiency. Keeping these sectors working closely together brings many benefits, as it leads to reducing possible shortcomings that could potentially jeopardize the compliance with the rules and warrant fines.

Tax compliance support

Maintaining tax compliance is important at any time, but at strategic situations, such as when planning for a bidding process or for selling a business, or even when seeking credit and investments, companies should be extra concerned with maintaining and providing proof of their good standing.

DPC's Paralegal department provides assistance to clients who may want to issue debt clearance certificates of any kind, occasionally or regularly. DPC also offers on-going consulting services on accounting, tax and labor matters for businesses seeking to operate safely in the market and to remain compliant with the Tax Authorities.