Tax Compliance 101: What is it and How to Accelerate it Using Deep AI

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Tax compliance is an essential component of doing business. Regardless of size or location, your company must comply with the tax regulations and expectations laid out by the tax authority. These regulations define how your company operates within the law and provide a clear framework to ensure you file, manage, and pay your taxes effectively. They also change constantly.

This means you must create your own framework and toolkit to plan your taxes, manage your paperwork, and stay ahead of regulatory changes. It is important for both organisations and individuals to deeply understand their tax status and how they need to comply with regulations.

Exploring Different Types of Tax Compliance

Tax compliance is complicated. But if you know the different types of tax compliance, you will find it easier to understand where you (or your business) fit in and what you need to do to remain compliant:

• Value Added Tax (VAT) – this is a tax placed on almost all goods and services sold by a business to other businesses or consumers. Every company that pays VAT for a part of a product or service can reclaim it, but it is the business’s responsibility to ensure that their VAT is paid correctly and on time.
• Domicile tax – if you live in the UK, you will pay your tax as a resident of the UK. If you live in another country, you pay tax on your income in the UK.
• Capital gains tax – you pay this tax on property, shares, business assets, and personal possessions that are sold.
• Income tax – this covers the tax you pay on your income.
• Inheritance tax – this is tax paid on an estate, including its value, trusts, and taxes.
• Self-assessment – this is how you file, pay and manage your tax records as an individual.

Income Tax Compliance

Many individuals are taxed at source, meaning you’re taxed when your company pays you. If you work for a company, they will handle your income tax payments and deductions and pay you your net salary after these deductions. This is one of the most straightforward taxes for individuals as your employer handles your tax and you simply ensure you have the right paperwork to submit to the tax authority at the end of the year.

As a business, you need to ensure your accounting team manages income tax deductions perfectly so both the business and employees are compliant.

Corporate Tax Compliance

Corporate tax can be something of a maze to navigate, thanks to constantly changing regulations and requirements. Your accounting team must be up to date with the latest rules and expectations outlined by the tax authority and implement these consistently throughout the tax year. The Making Tax Digital (MTD) platform requires that companies provide extensive paperwork and proof for all taxes to ensure a clear audit trail and visibility into company tax payments and expectations.  

International Tax Compliance

HMRC has specific arrangements with different countries worldwide regarding international workers and their salaries and taxation on business activities. Understanding international tax compliance means having visibility into corporate tax on a local and global level, employee taxes that affect how people are paid in different countries and how their taxes are managed, and employer taxes, which dictate how different branches in different countries address taxes within each region. This is a minefield that requires careful management of resources, paperwork, regulations and tax authority expectations to remain compliant.

Tax Compliance Challenges and Solutions

There is no getting away from tax – you must pay it and remain compliant in how you manage and report it – which means your best strategy for success is to understand the challenges you face.

It isn’t straightforward – there are grey areas such as employee taxable benefits, Travel and Entertainment (T&E) expenses, VAT exemptions and more that will directly affect how much tax you pay and pose these challenges:

• VAT is convoluted – you need to know what exemptions you face, how VAT is paid locally and internationally, and VAT restrictions in every region if you are to stay ahead of changing regulations. And you need to do all this without falling behind on returns and payments.
• Tax changes – regulations are, as already mentioned, always changing and the onus is on you to apply these changes on time. The laws keep on changing and each time they do, they often add more complexity. One simple change can ripple effect throughout your business as you manage its impact on your tax payments and compliance.
• The tax compliance burden can be significant. Companies find it hard to stay ahead of legislative and regulatory developments and to model the tax impacts of business and legislative changes.

Strategies for Overcoming Compliance Challenges

Managing all these different layers of tax compliance is challenging, which means you need to rely on technology and automation to help your business manage the admin and paperwork deftly while staying ahead of regulatory demands. Even the most complicated of tax regulations can be navigated successfully if you have the right solution in place.

Does your team have access to solutions that help them better source paperwork and collate it within a centralised dashboard for easy access and reporting? Do you have a reliable platform that can extract spend data from your business to provide reliable tax updates and insights? These are all critical questions to ask as you establish a solid foundation to better manage your taxation payments and strategies.

Deep AI in Tax Compliance

Artificial Intelligence (AI) has become to tax compliance what toothpaste has become to healthy teeth – essential. Smart, fast, powerful and adaptive, deep learning models help companies to create more complete and precise tax frameworks that allow them to stay ahead of regulations and better manage expenses, spend and tax compliance.

With the right deep AI tools, companies can move away from fractured data and information scattered across the business. Instead, they can harness all the data to manage taxes correctly, meet regulatory standards, save money, improve compliance and itemise expenses, and they can do all this at a fraction of the speed with new levels of accuracy.

Deep AI streamlines tax processes and reduces errors while extracting data and placing it in a centralised platform, allowing for improved reporting and predictive insights. It is changing the shape of business accounting by reducing the burden on the business and making tax compliance seamless.

Case Studies: Deep AI in Action

Michelin, a multi-national tyre manufacturing company, faced a high volume of global T&E expenses and struggled with the complexities of manual transaction processing and lack of visibility into their VAT recovery potential. By implementing the Blue dot’s deep AI-driven VAT recovery solution, Michelin recouped $3.3 million in domestic and foreign VAT. This gave them the confidence to scale compliant tax digitisation throughout all their entities.

Now, thanks to a centralised, transparent and precise VAT recovery process, Michelin has complete visibility and insights, has saved more than 5,000 workforce hours due to enhanced operational efficiency, and improved its compliance levels by 60% while reducing audit risk.

Implementing Deep AI for Your Tax Compliance

Implementing deep AI for tax compliance is not complicated, all it requires is the right technology partner.

First Steps and Considerations

Every business is different. Your tax compliance requirements will be very different from those of another company, so you need a deep AI solution capable of adapting to your needs and helping you achieve the right results. Some of the key steps you should take to ensure you start on a trusted road with the right partner include:

• Trust – use a deep AI solution with a proven track record and rich feature set capable of delivering what you need. For example, Blue dot is trusted by world leaders such as Philips, SAP Concur, PWC and Dell, among others.
• Intelligence – you want a deep AI platform with the most advanced technology available to cope with the ever-changing challenges of tax compliance. It must offer you VAT and taxable employee benefits capabilities alongside corporate tax compliance and clear visibility and insights into your data.
• Agility – you need a platform capable of managing the explosive growth in employee-triggered transactions, and supporting today’s remote and hybrid workplace. You don’t want to invest in technology that only uses AI within parts of its workflow as it won’t be able to contextualise the implications of unstructured transactions at scale. To meet today’s digitalised reporting requirements, you need a clear understanding and meticulous control over your tax data. This will enhance efficiency for your accounting team, and empower them to achieve levels of compliance more effortlessly than ever before.
• Data integrity – ensure that your deep AI solution can help you mitigate the risks of incomplete data, missing checks and poor calculations. It must allow you to consolidate and automate data retrieval and analysis to bolster your compliance and audit readiness.
• Reduce manual labour – don’t add another item to your beleaguered accounting team’s already overpopulated lists. Ensure your deep AI solution removes manual admin work and reduces the pressure felt by accounting and tax teams.

Embracing Technology for Compliance Efficiency

As consumer-style purchasing becomes the default, employee-generated expenditures become more fragmented, and unstructured data damage data integrity, a technology-driven approach based on deep AI capabilities can revolutionise how organisations approach tax and compliance. With a trusted and innovative solution, companies can embrace AI to improve efficiencies and compliance while reducing the admin burden and remaining ahead of regulatory changes.

Blue dot ticks every one of these boxes for your business. Our world-leading expense analysis platform helps you optimise your tax compliance and precisely calculate VAT reclaim opportunities. Our deep AI is designed to evolve with your business, empowering your finance teams with effortless automation and delivering exceptional peace of mind.