Sovos, a global tax compliance technology provider, has released its 2025 State of Tax Compliance Report, indicating that a significant majority of companies are facing increased tax-related compliance risks and escalating costs as governments worldwide mandate real-time tax reporting.
The report, an interactive digital experience, is built on data from 16 billion annual transactions across more than 100,000 businesses globally and monitors over 19,000 jurisdictions. Key findings reveal that 82% of companies believe their exposure to tax-related compliance risk has increased over the past five years. Additionally, 90% anticipate compliance costs will continue to rise as governments shift from traditional declarative reporting to real-time data collection methods.
The 2025 State of Tax Compliance Report offers a comprehensive view of the global tax landscape, detailing challenges and opportunities across major regions. In the United States, the report highlights the highly fragmented tax environment, noting over 12,999 jurisdictions and 643 sales tax rate changes in 2024. It also identifies the top 10 reasons for state sales tax audits and the states most likely to initiate them.
For EMEA, the report outlines countries with frequent VAT rate changes and industries grappling with high VAT complexity. It also specifies the four most common reasons for e-invoice rejections and the top VAT penalties issued by EU tax authorities. Latin America stands out as a global leader in e-invoicing maturity, now requiring real-time reporting for 100% of VAT transactions. Sovos processed 3.5 billion electronic documents across the region in 2024, with the report identifying countries that have achieved high levels of automation and audit readiness. Brazil, in particular, is noted for its complex system mandating automated processes and imposing penalties up to 225% for unpaid taxes.
Chris Lynch, Chief Marketing Officer at Sovos, commented on the shift: “There’s no such thing as after-the-fact reporting anymore. Governments are embedding themselves directly into business systems, from accounts receivable and accounts payable to logistics and general ledgers. This new level of visibility changes how every organization must approach compliance.”
Additional findings, based on a survey conducted by CFO Dive’s Studio ID and Sovos, illustrate how finance leaders are prioritizing technology investments. The survey showed that 95% consider accurate real-time data reporting critical, while 94% are investing in technology to automate tax and compliance processes. Furthermore, 91% prioritize lowering or maintaining compliance costs, 86% are focused on preparing for future e-invoicing mandates, and 76% report a positive return on investment from centralized indirect tax platforms.
The 2025 State of Tax Compliance Report provides finance and compliance professionals with data-rich insights into the evolving global tax environment, allowing users to navigate by region and explore specific challenges. The full report is accessible online at stateoftax.com and is also available for download.
Sovos transforms tax compliance through its Compliance Cloud platform, which assists businesses in identifying, determining, and reporting tax obligations globally. The platform processes over 16 billion transactions annually across nearly 200 countries. More than 100,000 customers, including half of the Fortune 500, utilize Sovos’ solutions.
