What is the difference between Tax Compliance Software and Tax Management Software?

A comparative analysis of tax management vs tax compliance software

Organisations in South Africa manage their taxes in order to be compliant with the South African Revenue Service (SARS). Doesn’t that then mean that tax compliance and tax management are the same thing? In short, the answer is no, it doesn’t. An organisation can be tax compliant in the eyes of SARS without ever achieving effective tax management at an organisational level.

What is tax compliance?

Tax compliance means that taxpayers have met their legal obligations under the tax laws and includes ensuring that all tax returns have been submitted to the revenue authority and tax liabilities have been paid.

What does “Tax compliance” in South Africa mean?

Every country has legislation that sets out the tax obligations of companies. In South Africa, that legislation is the Tax Administration Act 28 of 2011. Naturally, the legislation provides for criminal offences and penalties in the event of tax noncompliance. The severity of these penalties depends on the nature of the offences of course.

The South African Institute of Tax (SAIT) states that “Compliance in the tax world means that taxpayers have met their legal obligations under the tax laws and includes ensuring that all tax returns are submitted, and tax liabilities paid.”

Tax compliance sounds simple enough in principle, but it can be difficult to ensure compliance in today’s evolving tax environment as there are various aspects of tax compliance that create complexity. How do you avoid those unnecessary financial penalties then for tax non compliance?

It is simple. Register your tax obligations and make payment prior to the expiration of the payment deadline, and like magic, you are compliant. That sounds like a great plan . . . but as Mike Tyson once said, “everyone has a plan until they get punched in the mouth”.

The challenge in respect to performance of tax compliance is in the complexity that comes with managing and being accountable for several legal entities, multiple tax jurisdictions and the number of tax filings that are required to be submitted to SARS.

What is tax management?

Tax management is an organisations internal processes and tax workflow that covers allocating tax work, determining the value of tax submissions, reviewing of calculations and reconciliations, preparing tax returns, reviewing tax submissions, and keeping a full an accurate set of all tax records.

What does “Tax management” in South Africa mean?

The definition of tax management is less available than that of tax compliance, with many investment website definitions including the characteristics such as “filing a tax return”, “auditing” and “source deduction”.

Based on our definition of tax management above, we are sure you’ll agree that tax management and tax compliance are different things. Our tax software allows organisations of all sizes to take advantage of both tax workflow management and tax compliance to include:

• VAT compliance software
• Automatic tax calculation software
• Tax compliance automation
• Document management software
• Multi jurisdictions capability
• Review and sign-off processes
• Automated notifications

What functionality should an Digital Tax Management Software have?

A Digital Tax or Electronic Tax Management Software (ETMS) is the category of software that relates to tax teams, or finance teams responsible for tax. From the above definitions, it’s clear that any ETMS should offer both tax compliance software and tax management Software in a single solution.

Tax compliance software functionality:

The following is the type of functionality generally expected in a Tax compliance software solution:

1. Deadline reminders
2. Integrations into SARS to collect correspondence
3. SARS compliance checker
4. SARS submission and payment monitoring
5. Direct submission to SARS for multiple tax types
6. Record keeping

Tax management software functionality:

The following is the type of functionality generally expected in a tax management software solution:

1. Deadline reminders sent to specific responsible person
2. Integrations into SARS correspondence that distributes to responsible person
3. Review and signoff of working papers and submissions
4. Automatic remittance calculation that feeds the compliance tracking
5. Direct submission to SARS for multiple tax types
6. Tracking and reporting on obligation deadlines
7. Attachment of documents to tax filings
8. Record keeping with simple search functionality for easy location

Summary of differences

If the functionality lists for tax compliance software and tax management software look similar, that’s because there is indeed some overlap. After all, how can an organization “manage” it’s taxes without simultaneously being in “compliance” with their legal obligations?

Tax management software, however, goes a lot further than just compliance feature. Tax management software is to tax compliance software what SAP is to Xero; they both manage finances but at a very different scale and in vastly more ways.

Tax compliance software can be made for a single user to manage their own deadlines, while tax management software enables users all over the organization to be involved, as they inevitably are, in the process of tax determination, submission and payment.

Konsise

The advantage of Konsise is that it contains the tax compliance and tax management solutions that help organisations to make decisions that are accurate, automate their internal resources for economic benefits while maintaining the security and benefits of cloudflare omnichannel technology.

Businesses that use Konsise have more time to spend with their internal customers while they stay ahead of their obligations to SARS.