Zakat and VAT returns in Saudi Arabia: a filing calendar overview

Companies in the Kingdom deal with one authority for most of their filings: the Zakat, Tax and Customs Authority, ZATCA. The returns a typical company files are zakat or corporate income tax annually, value added tax monthly or quarterly, and withholding tax on payments to non-residents. The outline below describes the cycle and the records behind each return. Filing frequencies and dates are set by ZATCA and are reviewed from time to time, so confirm the current position before relying on any date.

Zakat or income tax, once a year. A Saudi or GCC owned company is generally subject to zakat; a company with non-GCC ownership is generally subject to income tax, and a mixed company apportions between the two. The return is filed after the financial year end, within the period ZATCA prescribes, together with audited financial statements. ZATCA issues an assessment, and a certificate is released once the position is settled. Many customers, government bodies and banks ask for that certificate before they will pay or renew a contract, which is the practical reason to file early rather than at the deadline.

The zakat base. The computation is not simply profit. It starts from capital and reserves and adjusts for long-term financing, provisions and the deductible value of long-term assets, with the result compared against adjusted net profit. The inputs come from the audited balance sheet, the fixed asset register, loan agreements and the movement in provisions. Keeping those schedules through the year, rather than rebuilding them in the week before filing, is the single biggest saving on a zakat engagement.

VAT, monthly or quarterly. A registered business whose annual taxable supplies exceed the threshold ZATCA publishes files monthly; businesses below it file quarterly. Each return reports output tax on sales, input tax on purchases and imports, adjustments, and the net payable or refundable. Payment is due with the return, and a return filed on time but paid late still attracts a penalty.

The documents behind a VAT return. You need a sales listing that ties to revenue in the ledger, a purchase listing with valid tax invoices, import documents showing the tax paid at customs, credit and debit notes, and a schedule of any exempt or zero-rated supplies with the evidence supporting the treatment. Electronic invoicing requirements apply to invoices issued in the Kingdom, so the invoices themselves have to meet the prescribed format and integration rules.

The reconciliation that prevents queries. Each quarter, reconcile output tax in the returns to revenue in the ledger, and input tax in the returns to the purchase and import accounts. Explain the differences: zero-rated exports, exempt supplies, non-deductible input tax, and timing. A clean reconciliation, kept with the return, answers most of the questions ZATCA asks later and takes far less time than reconstructing the position during a review.

Withholding tax. Payments to non-residents for services, royalties, interest, dividends and similar amounts carry withholding at prescribed rates that depend on the type of payment and any applicable treaty. The tax is deducted, paid over and reported on the prescribed cycle, and the supporting evidence for a treaty rate should be on file before the payment is made rather than after.

Running the year. Build a single calendar with the VAT periods, the withholding cycle, the audit timetable and the annual zakat or income tax return, and keep one folder per period holding the return, the payment confirmation and the reconciliation. Where a filing needs a licensed signatory in the Kingdom, agree who signs well before the deadline.

This article is general information, not advice. Contact us to discuss your situation.