Tax compliance software is software that assists

tax A tax is a mandatory financial charge or levy imposed on an individual or legal entity by a governmental organization to support government spending and public expenditures collectively or to regulate and reduce negative externalities. Tax co ...

compliance, and may cover

income tax An income tax is a tax imposed on individuals or entities (taxpayers) in respect of the income or profits earned by them (commonly called taxable income). Income tax generally is computed as the product of a tax rate times the taxable income. Tax ...

corporate tax A corporate tax, also called corporation tax or company tax or corporate income tax, is a type of direct tax levied on the income or capital of corporations and other similar legal entities. The tax is usually imposed at the national level, but ...

VAT A value-added tax (VAT or goods and services tax (GST), general consumption tax (GCT)) is a consumption tax that is levied on the value added at each stage of a product's production and distribution. VAT is similar to, and is often compared wi ...

, service tax,

customs Customs is an authority or Government agency, agency in a country responsible for collecting tariffs and for controlling International trade, the flow of goods, including animals, transports, personal effects, and hazardous items, into and out ...

sales tax A sales tax is a tax paid to a governing body for the sales of certain goods and services. Usually laws allow the seller to collect funds for the tax from the consumer at the point of purchase. When a tax on goods or services is paid to a govern ...

use tax A use tax is a type of tax levied in the United States by numerous state governments. It is essentially the same as a sales tax but is applied not where a product or service was sold but where a merchant bought a product or service and then conv ...

, or other taxes its users may be required to pay. The software automatically calculates a user's tax liabilities to the government, keeps track of all transactions (in case of

indirect taxes An indirect tax (such as a sales tax, per unit tax, value-added tax (VAT), excise tax, consumption tax, or tariff) is a tax that is levied upon goods and services before they reach the customer who ultimately pays the indirect tax as a part of ma ...

), keeps track of eligible tax credits, etc. The software can also generate forms or filings needed for tax compliance. The software will have pre-defined tax rates and slabs and can allocate income or revenue in the right slab itself. The aim of the software is to provide the user with easy way to calculate tax payment and minimize any

human error Human error is an action that has been done but that was "not intended by the actor; not desired by a set of rules or an external observer; or that led the task or system outside its acceptable limits".Senders, J.W. and Moray, N.P. (1991) Human Er ...

. Tax compliance software has been present in developed countries for long in the form of tax calculators mainly for direct taxes, such as income tax and corporate tax. Gradually some more complex and customized tax compliance software has been designed and developed by organizations around the globe. Tax compliance software can be divided into two main categories:

direct Direct may refer to: Mathematics * Directed set, in order theory * Direct limit of (pre), sheaves * Direct sum of modules, a construction in abstract algebra which combines several vector spaces Computing * Direct access (disambiguation), ...

and

indirect tax An indirect tax (such as a sales tax, per unit tax, value-added tax (VAT), excise tax, consumption tax, or tariff) is a tax that is levied upon goods and services before they reach the customer who ultimately pays the indirect tax as a part of ...

compliance software.

Direct tax compliance software

direct tax Although the actual definitions vary between jurisdictions, in general, a direct tax is a tax imposed upon a person or property as distinct from a tax imposed upon a transaction, which is described as an indirect tax. There is a distinction betwee ...

is one paid directly to the government by the persons (juristic or natural) on whom it is imposed (often accompanied by a tax return filed by the taxpayer). Examples include income tax, corporate tax, and transfer tax such as

estate tax International tax law distinguishes between an estate tax and an inheritance tax. An inheritance tax is a tax paid by a person who inherits money or property of a person who has died, whereas an estate tax is a levy on the estate (money and pr ...

and gift tax. Basic software for income tax in the form of a tax calculator, and are now widely used. For example, the

Government of India The Government of India (ISO 15919, ISO: Bhārata Sarakāra, legally the Union Government or Union of India or the Central Government) is the national authority of the Republic of India, located in South Asia, consisting of States and union t ...

provides an income tax calculator on their website.

Corporate tax A corporate tax, also called corporation tax or company tax or corporate income tax, is a type of direct tax levied on the income or capital of corporations and other similar legal entities. The tax is usually imposed at the national level, but ...

compliance software has also been in existence for years, more often than not within the company's Finance & Accounting software or financial module of

ERPs Ethernet Ring Protection Switching (ERPS) is an effort at ITU-T under G.8032 Recommendation to provide sub-50ms protection and recovery switching for Ethernet traffic in a ring topology and at the same time ensuring that there are no loops formed ...

. These suites have the facilities to maintain the company's General Ledger, Cash Management, Accounts Payable, Accounts Receivable, Fixed Assets along with some basic taxes.Financial Features of SAP ERP
Retrieved 20 June 2008

Indirect tax compliance software

(such as sales tax, value added tax (VAT), or goods and services tax (GST)) is a tax collected by an intermediary (such as a retail store) from the person who bears the ultimate economic burden of the tax (such as the customer). The intermediary later files a tax return and forwards the tax proceeds to government with the return. Indirect Tax compliance has always been much more complex as compared to the direct taxes. Many indirect tax compliance programs have separate modules for VAT, Service Tax, Customs etc.

VAT compliance software

Value Added Tax A value-added tax (VAT or goods and services tax (GST), general consumption tax (GCT)) is a consumption tax that is levied on the value added at each stage of a product's production and distribution. VAT is similar to, and is often compared wi ...

(VAT) legislation has a common structure across countries (and states in case of

India India, officially the Republic of India, is a country in South Asia. It is the List of countries and dependencies by area, seventh-largest country by area; the List of countries by population (United Nations), most populous country since ...

). Software must be customized to each country, however, because of differences in the some areas, such as handling of credit of capital goods, sale of scrap and second-hand goods, formats of mandatory submissions and audit exercises.

Service tax compliance software

Service tax compliance software often include maintenance of credit registers, handling reverse charges, rebate claims on export of services along with payment of tax and filing of returns.

References

{{DEFAULTSORT:Tax Compliance Software Financial software Regulatory compliance

Direct tax compliance software

Indirect tax compliance software

VAT compliance software

Service tax compliance software

See also

References