North America

Brazil's Tax Revolution: Eight Years of Drastic Change Ahead

A massive overhaul will transform one of world’s most complex tax systems, but the transition period poses unprecedented challenges for businesses.

Brazil is embarking on its most comprehensive tax transformation in decades with the approval of the Reforma Tributária in January 2025. The sweeping reform will replace the country’s notoriously complex web of federal, state, and municipal taxes with a streamlined dual VAT system over an eight-year implementation period from 2026 to 2033.

Currently ranked among the world’s most complex tax regimes, Brazil’s existing system has created what government officials acknowledge as high compliance costs, elevated litigation, poor competitiveness, and widespread confusion among businesses trying to meet their tax obligations.

A Complete System Overhaul

This transformation will result in Brazil having an expected tax rate of 28 percent, the highest among major world economies. With over 5,570 municipalities each potentially having different implementation requirements, accurate tax determination will become more critical than ever for business competitiveness.

The Challenge of Dual Compliance

Perhaps the most daunting aspect of the reform lies in its gradual implementation. Beginning in 2026, businesses will face the unprecedented challenge of complying with both the old and new tax systems simultaneously during the transition years.

The CBS will launch in 2027, fully replacing PIS and COFINS while the selective tax takes effect. The most complex phase runs from 2029 to 2033, when IBS will gradually replace ICMS and ISS over five years, starting at just 10 percent in 2029 and reaching full implementation by 2033.

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Technology Becomes Essential

Industry experts warn that manual compliance will be impossible under the new system. Recent surveys show that 95 percent of businesses recognize the importance of real-time data reporting for tax compliance operations, yet many companies remain unprepared for the technological demands ahead.

The shortage of qualified tax specialists in Brazil is already driving up consulting costs to unaffordable levels for many businesses, making technology-driven solutions not just preferable but essential for survival during the transition period.

Action Required Now

With implementation beginning next year, companies must immediately begin mapping their current tax flows, reviewing existing processes, updating e-invoicing systems, and investing in future-proof technology solutions. The window for preparation is rapidly closing, and the complexity will intensify before it improves.

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What do you do when your tax data doesn't match the government's?

With the advent of real-time reporting and data collection, today’s reality is that the governments and tax authorities often know more about your business than you do. Based on this, they frequently pre-fill tax returns and present their numbers to you rather than past filing processes that allowed you to collect, refine and report your own tax liability findings.

However, what if the government is telling you that the amounts you owe are greater than you believe or had anticipated based on your own internal calculations?

Here is where the rubber meets the road, so of speak. In the past, when your business would collect the data and file your tax returns, the IRS would accept them and then if they had reason to doubt your figures, they could conduct an audit to determine if you were correct. If you were wrong, you would generally be charged a nominal fee.

Today’s New Reality

In today’s world of tax compliance, the onus is on the business to dispute the numbers with data of their own. If they are unable to so, then the numbers provided by the tax authority stand as the official returns of record. In other words, if you can’t prove otherwise, it stays as is.

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Enter Mirror Visibility™

Mirror Visibility offers several benefits for businesses in the context of tax compliance. One of the primary advantages is that it provides businesses with the ability to see exactly what tax authorities see, enabling them to validate or challenge their assessments with confidence. This is crucial because it allows businesses to analyze and present the source data required to argue against any discrepancies in the pre-filled tax returns provided by the authorities.

Additionally, Mirror Visibility helps businesses avoid conflicting data and build the capabilities to mount a defense with accurate data. This is particularly important in a world where tax administrations receive source data from multiple systems, which they can combine, triangulate and analyze, while a business cannot. By investing in a single compliance partner with a profound understanding of the enterprise software ecosystem, businesses can achieve data harmonization and trust, simplifying how they meet mandatory reporting requirements set by governments.

To learn more about the concept of mirror visibility and how it can assist your business in protection itself against being overcharged on its tax obligations by the government, read the following white paper.

White paper

SAP S/4HANA Finance and Central Finance: State of the Market 2023

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Finance transformation is imperative in the modern digital economy as organizations strive for greater resilience and performance. SAP S/4HANA Finance with full deployment is designed to offer business leaders real-time insights into financials and operations while reducing complexity across their financial system landscape. To maximize ROI in SAP S/4HANA for Finance, continued awareness of technological advancements and industry trends are vital so organizations can make proactive decisions. This SAPinsider survey aimed to better understand business priorities organizations enabled with SAP S/4HANA for Finance with full deployment, and aspired goals when deployed with Central Finance. 

Download the report for key insights to how other SAP companies are handling the S/4HANA migration, including:

  • Many finance leaders, along with their downstream teams, lack the robust tools to effectively support executive decision-making in this complex operating environment.  
  • Nearly half of organizations deploying SAP S/4HANA for Finance with Central Finance identified business model transformation to support digital innovation as their primary goal.  
  • A finance-first digital transformation enabled by SAP S/4HANA for Finance with Central Finance deployment is integral to developing an agile approach to improve reporting, planning, and insights from finance. 

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Read the full report to learn about sales and use tax challenges for software providers.

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Sales Tax Compliance Considerations for U.S. Software Providers

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What are the current technologies being adopted, challenges and future opportunities? 

Sovos and SG Analytics conducted a survey to better understand key issues and approaches to sales and use tax compliance across the U.S. software segment. More than 200 U.S.-based software organizations were interviewed, including finance/accounting and IT professionals. 

Sales and use tax compliance is a critical issue that software organizations must address to reduce their regulatory risks, increase operational efficiency and boost their bottom line. Below are top takeaways on how the U.S. software industry is evolving, current sales and use tax challenges faced by software organizations, as well as potential solutions and future growth prospects.  

  • Audits are increasing, as are their associated costs and penalties. In the last 12 months, 41% of software organizations have paid an annual audit penalty of $160K.  
  • Improving operational efficiencies is challenging for professionals managing sales and use tax compliance. The survey found that 60% of finance/accounting and IT professionals spent one-quarter of their monthly time on sales and use tax compliance.   
  • There is an increased shift towards cloud-based solutions. Eighty-three percent of respondents plan to migrate to the cloud in the next 24 months. Faster automated data feeds, database conversions and effective collaboration between different departments are helping to drive the shift.  
  • Businesses need solutions that eliminate the reliance on manual data entry. Over two-thirds of respondents said they want scalable sales and use tax solutions with flexible deployment options and data security features.  

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Read the full report to learn about sales and use tax challenges for software providers.

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The Case for Sales Tax Simplification

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As we approach the five-year anniversary of South Dakota v. Wayfair, states must take meaningful steps to ensure their tax laws and rules can be readily complied with by both local and remote sellers. State sovereignty is a core aspect of the U.S., and barring a national consumption tax being instituted, sales tax is likely to remain the sole province of state and local governments. However, there doesn’t need to be one overarching approach to sales tax for it to be simpler, and states don’t have to wait for federal mandates to start making simplifications.

This white paper will review what’s currently in place for sales tax across the nation and discuss what can possibly be done to try and make it a little bit easier.

Read this white paper for more information on:  

  • How states can make their sales tax systems meaningfully simpler while maintaining necessary revenue
  • The role of tax technology, and how it’s impacting the way states approach sales tax
  • The debate over uniform economic nexus standards

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White paper

Taxing the Digital Economy: The Anachronism of Street Address

Real estate may be all about “location, location, location,” but it is just as critical when it comes to determining accurate sales tax. Historically, customer street addresses are highly important for ensuring accurate tax determination. As technology—and the subsequent concern of privacy—evolves though, digital content providers need a path to compliance that is not reliant on customers sharing exactly where they live. 

But how can businesses walk that line? Opting for a solution supported through modern tax technology can be the answer. Organizations must address this issue head on to ensure they maintain taxing the digital economy in an ever-evolving world. 

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Tax Reporting for Nonemployee Withholding

What you need to know about reporting nonemployee compensation 

For over 100 years, the IRS has looked for ways to get third parties to report nonemployee compensation payments. But that has become increasingly complicated, especially with the rise of the independent contractor workforce. Additionally, there are disparate federal and state reporting obligations, the thresholds for reporting requirements have lowered and there are other tax reporting requirement changes yet to happen. 

Typically, when taxpayers are not W-2 workers, they receive their income from independent sources. This means that the taxpayer could receive a 1099-MISC, a 1099-NEC or a 1099-K (instead of the W-2 that full-time employees receive). Depending on what was paid and how it was paid will determine which of those forms the taxpayer receives.

How can a business stay compliant with all nonemployee withholding and reporting requirements? What determines the type(s) of form that individuals receive?  

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This white paper highlights key points in tax reporting for nonemployees withholding, specifically as it relates to the 1099 forms, including:

What are the differences between Forms 1099-NEC, 1099-K and 1099-MISC?

  • What does each one mean?
  • When would you need to report those forms? 

The rise of the gig economy 

  • How has this contributed to the tax gap?
  • Why this led to a lowered 1099-K reporting threshold – and what that means for your business.
  • Which states follow the federal reporting threshold? Which ones differ? 

Common reporting issues 

  • Gross amounts v. net amounts – see examples of how to meet all requirements.
  • Understanding attorney payments and exempt recipients. When must you issue a 1099? Which form is required? 

Backup withholding enforcement 

  • Reports from the Treasury Inspector General for Tax Administration led to recommendations that the IRS create a process to identify and enforce backup withholding.
  • The IRS has not previously strongly enforced backup withholding, but it is creating a significant tax gap.
  • How much money has not been reported? What does that mean for you? 

Tax and regulatory reporting compliance grows increasingly digital. Businesses of all sizes and across all industries are impacted. Disparate federal and state reporting obligations, lower thresholds for 1099 reporting and future tax reporting changes can all impact compliance requirements for companies. Once you understand the organizational costs associated with ever-changing tax reporting needs, it can help ensure proper management of delivering all necessary information to recipients, the IRS and states. Our white paper can help clarify the confusion and provide thorough explanation to what your business must do to maintain compliance.

Learn more about nonemployee withholding reporting requirements

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White Paper

Don't Let Government Mandated E-Invoicing Stop Your Business

Governments are moving away from ad hoc e-invoicing oversight in favor of always-on transparency and enforcement.

Your ERP, accounts payable/receivable, procure-to-pay, order-to-cash, supply chain and logistics, and HR and payroll systems – they’re all in play.

This new level of mandated transparency introduces a new layer of operational risk.

How will you respond?

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Learn what’s at stake.

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IRS Tax Guidance for Virtual Asset Service Providers is Coming Soon. Is Your Organization Ready?

As the IRS prepares to release Form 1099 reporting requirements for virtual asset transactions, VASPs need to evaluate the various aspects of virtual currency cost basis calculations and the resulting tax withholding and information reporting considerations. 

This whitepaper will not only allow your organization to build a scalable compliance strategy and avoid costly penalties but also negate potential disruptions of service for your clients.

This whitepaper was created by experts at Silver Management and Sovos Compliance.

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Download your free report and get:

  • An overview of the current reporting environment for virtual asset service providers
  • Background on I.R.C. 6045, which may soon be expanded to include virtual asset transactions
  • Cost basis considerations as it relates to: trading, transfers, income and payment transactions
  • Regulatory & Tax Information Reporting considerations for virtual asset transactions
  • A path to building compliance and scalability for the long-term

As cryptocurrency goes mainstream, regulators have made digital assets a priority. As such, we believe a tidal wave of new guidance is coming. This whitepaper will not only allow your organization to build a scalable compliance strategy and avoid costly penalties, but also negate potential disruptions of service for your clients.

Annual Report

Sales and Use Tax in 2021:

What’s Changed?

Complexity Continues to Rule

As the rules governing economic nexus in the U.S. grow increasingly complex, it is important to define the sales and use tax changes being considered, the ramifications of new laws on remote sellers and marketplace facilitators and the varied approaches organizations take to effectively manage their tax obligations. For example, the end of 2020 had more than 14,000 bills being considered that could change sales tax compliance requirements. During that same time in 2019, there were only 7,000 bills.

The second annual Sovos Sales and Use Tax report delves into numerous issues impacting the industry, including the long-term implications on regulatory authorities from COVID-19 and how the existing tax gap is fueling new approaches to oversight and enforcement of current laws and standards. Tax and regulatory experts provide insights and technologists offer guidance and methods to help organizations understand how to reduce financial and reputational risk by remaining compliant.

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Last year showed that sales and use tax is changing and is changing at an increasingly fast pace. New policies capture tax more accurately and sooner. States continue to test the limits of organizations’ ability to track, process and remit sales tax. Furthermore, the COVID-19 pandemic added an additional layer of complexity and uncertainty, with more states adding economic nexus requirements. 

Why this matters to your business

The digitization of tax is at center stage in many growing businesses’ agendas. Organizations are quickly determining that automated technology solutions are increasingly critical to ensure a positive user experience. Are you confident that your sales tax solution will keep pace with every change or update? As your company evolves and changes, can your tax solution keep pace? Are you facing costly database or hardware upgrades and replacements? What’s the best way to ensure your solution seamlessly scales along with your business needs – all while maintaining compliance and controlling costs?

Sales and use tax manual processes are quickly becoming obsolete, creating a substantial burden on your team to meet new requirements to remain compliant. To that extent, what are the opportunity costs of managing sales tax on your own? What other critical business functions could your team be focusing on instead? And let’s not forget a worst case scenario: What happens when you change your processes, choose to manage sales tax on your own and get it wrong? Having a cloud-based sales tax software can reduce manual work while also offering better integration, faster updates, more automated processes and easier data management.  

Why talk to Sovos

Sovos understands that sales tax is complicated, which is why we compiled data, best practices and guidance from real experts to make the process more efficient and seamless. This report discusses the current state of the industry and what is likely coming further down the line, helping you garner a more complete understanding so you can maintain compliance without losing productivity. 

Ready to take the first step toward modern tax compliance? Download the report and reach out to our team with any further questions.

White paper

Don't Let Government Mandated E-Invoicing Stop Your Business

Governments are moving away from ad hoc e-invoicing oversight in favor of always-on transparency and enforcement. Your ERP, accounts payable/receivable, procure-to-pay, order-to-cash, supply chain and logistics, and HR and payroll systems – they’re all in play.

This new level of mandated transparency introduces a new layer of operational risk. How will you respond?

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Learn what's at stake.
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Learn more about government mandated e-invoicing's affect on your business

Government Mandated E-invoicing Laws are Expanding Globally

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Why Government Mandated E-invoicing Rules are Burdening the Bosses

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Unquantifiable Costs and Hidden Risks of Government Mandated E-Invoicing

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Sovos Named a Leader in “IDC MarketScape for Worldwide SaaS and Cloud VAT Software”

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Will Government Mandated E-Invoicing Rules Disrupt Your IT Organization’s 2022 Plans?​

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SAP® Central Finance and Digital Tax Compliance

Critical Prerequisites to Successful S/4HANA Digital Transformation

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Overcome the hidden barriers to your SAP Central Finance migration

For some SAP customers planning a move to Central Finance, tax compliance will not be a priority. Unfortunately, that will be a costly oversight. Today, those who fail to comply with global tax mandates face costly audits, financial penalties, decreased cash flow and damaged relationships with suppliers and customers. Non-compliance can even derail your Central Finance and SAP S/4HANA migrations altogether. And in some countries, it can bring your entire business to a screeching halt.

Get the free Compliance at the Core white paper and learn:

  • the tax compliance barriers you may have overlooked
  • how to prevent costly roadblocks
  • how tax compliance mandates will affect your Central Finance migration
  • precise steps your business can take to ensure your migration isn’t derailed due to non-compliance
  • what a successful migration to SAP Central Finance looks like

Trends in E-invoicing Compliance, 10th Edition

This paper outlines in detail the global trend towards real-time tax ‘clearance’ of invoices and how this impacts businesses in their day-to-day operations and business-to-business transaction automation strategies.

Since the last edition, the trend towards compulsory transaction-oriented integration of e-business systems with public authorities has continued to accelerate. The growing consensus among e-invoicing and VAT professionals is that indirect tax controls are quickly evolving towards real-time whereby tax administrations essentially become a ‘third trading partner’ in the exchange of sales and purchasing data between suppliers and buyers.

Download this paper for our insight into how companies can ensure their push towards automation with tax administrations doesn’t end up fragmenting their digital transformation of business processes.

19 Things About Compliant Invoice E-archiving

Most enterprises already have one or several solutions for
storing electronic data and documents. Such content management or other applications often include excellent features for aggregation, indexing, analyzing and general management of
a company’s information resources.

However, when storing original electronic invoices and similar legally critical documents, such solutions may not offer the level of legal requirement monitoring, specific regulatory compliance features and documentation that is needed for multi-country legal archiving.

In this guide our experts look at the international requirements for compliant e-archiving and how we ensure our partners and clients remain compliant with the Sovos eArchiving solution.

Trends: Insurance Premium Tax

Tax Compliance for Tomorrow

It’s no surprise that the pressures on governments globally to raise revenue, close loopholes and reduce fraud, continue to mount.

Across Europe within the last 12 months we’ve seen this increasingly with tax authorities taking steps to improve efficiencies with technology at the forefront.

This report takes a holistic look at the insurance premium tax compliance landscape.  It looks at what’s driving increasing governmental demands and the challenges insurers face.  It contains the views and thoughts from the Sovos global practice including our indirect tax, e-invoicing and other subject matter experts from across the organisation.

Don’t Let Sales Tax Stop Your Ability to Sell

Managing sales tax should never be an impediment to core business objectives. Whatever industry in which your business operates, you aim to provide products and/or services to your customer base – managing sales tax is not your core objective. However, sales tax cannot be an afterthought either.

Deciding on and implementing a sales tax process or solution for your organization is essential for meeting all levels of compliance requirements. No one wants to face costly notices and audits. Finding the right approach to sales tax management also requires an evaluation of your business’ internal capabilities, existing technology and varying levels of expertise.

Remember that no business is too small when it comes to sales and use tax collection and remittance. Since June 2018 with the passing of the South Dakota v. Wayfair, Inc. Supreme Court decision, the sales tax world was forever changed. Nearly every state has enacted and further refined its rules regarding the sales tax collection responsibilities of remote sellers. The number of jurisdictions and regulations are continuing to grow and become more complicated.

Local, state and federal governments alike are implementing more digital options to help increase their ability to collect revenue, reduce fraud and shrink the tax gap. Furthermore, the Wayfair decision greatly expanded organizations’ nexus footprints, and states are moving quickly to establish new regulations to maximize income owed. Notices, audits, penalties and fines will be used more aggressively as tax authorities work to expedite collections and improve transparency.

Even if you have a process in place for sales tax nexus management, it could be a good idea to ensure that it’s the best approach for meeting current compliance needs. Manual processes are not enough. The required automated assistance and expertise can often exceed the capabilities of most internal business units. Reliable cloud-based software that can automate the regulatory update process, manage labor intensive activities and stay up-to-date with the latest changes is becoming more essential each day.

Along with regulators to consider, businesses must also be aware of how a poor sales tax management process impacts customers. What if your sales tax calculation software takes too long to calculate tax at the point of transaction? Or, what if the incorrect sales tax is calculated, forcing you to charge more to the customer after the sale has occurred? Customer expectations must continuously be met, even as sales tax compliance requirements evolve in complexity.

So what is the true cost of tax management on your business? Can the right tools really give you sales tax peace of mind? We explore both of those questions and more in the following white paper.

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Ask our tax experts how Sovos Sales and Use Tax can help with your compliance needs.
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Bridging the IT-Tax Compliance Gap

Whiter paper

Compliance Mandates Around the World Have Elevated the Importance of Tax

It is more important than ever that IT decision- makers and in-house tax and finance professionals enter into meaningful, strategic conversations about how—and why—to accelerate digital transformation to respond to invasive new tax mandates.

Read more and download the pdf.

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Overcome the hidden barriers to AP tax compliance

Meeting the challenges of accounts payable (AP) automation in the new world of digital tax requires two important components: modernization and consolidation of disparate AP systems and integration into SAP. Companies that don’t have their AP resources in line with domestic and international tax mandates risk not only resource-sapping and potentially costly audits, but also diminished cash flow, supply chain interruptions and strained supplier relationships.

AP tax compliance is a critical component of any SAP shop’s implementation strategy, including the move to SAP S/4HANA. AP leaders ignore it at their own risk. 

Get the free Accounts Payable Tax Compliance white paper and learn:

  • How to solve AP automation challenges that occur when tax authorities require data at the transaction level
  • How to overcome supplier errors and AP system diversification
  • How to avoid costly AP-induced audits
  • How to ensure both compliance and data purity in AP e-invoicing processes
  • The different variations of digital e-invoicing and VAT reporting AP teams will face
See for yourself how the Sovos Compliance Cloud can meet your business' unique tax compliance challenges.
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