This article has been researched and written by the Tax Consultant Team at Creation Business Consultants. AI has not been used in generating this article.
Saudi Arabia’s Tax Amnesty Program offers businesses a chance to clear past tax obligations without penalties. In this blog, you’ll learn which taxes are covered, who qualifies, how to apply, and how companies can benefit, especially through a practical example on withholding tax.
SAUDI ARABIA’S TAX AMNESTY PROGRAM
The Saudi Arabia Tax Amnesty Program, formally titled the “Cancellation of Fines and Exemption of Financial Penalties” initiative, is a Zakat, Tax and Customs Authority (ZATCA) measure. First introduced in March 2020 to mitigate the economic effects of the COVID-19 pandemic.
The initiative has been extended for an additional 6-month period, starting from 1 July 2024 until 31 December 2024. This is an extension of the tax amnesty introduced on 1 June 2022 and covers tax obligations required to be fulfilled before the effective date of the initiative’s extension.
On 29 December 2024, this initiative has been extended for an additional six-months period, commencing on 1 January 2025, and concluding on 30 June 2025. This extension follows the tax amnesty program introduced on 1 June 2022 and applies to tax obligations that must be fulfilled prior to the date of the extension.
Taxes Covered by the Amnesty Program:
However, the Amnesty Program Excludes:
- Fines paid before June 1, 2022
- Penalties arising from tax evasion
MAIN PURPOSES OF THE KSA TAX AMNESTY PROGRAM
- Penalty Exemption: Upon approval by ZATCA, applicants will be exempt from penalties related to:
- Late Tax Registration
- Late Payment of any Tax
- Late Submission of Tax Returns
- Amendments to VAT Returns
- VAT Field Detection and E-Invoicing Violations
- Late-Payment Fines in Instalments Plans
- Support Business Continuity: The program allows businesses to resolve historical tax issues, helping them start with a “clean slate,” enhance financial stability, and restore business reputation.
- Economic Relief: Provides financial relief to businesses and individuals impacted by economic challenges, especially those resulting from the COVID-19 pandemic.
- Boost Revenue Collection: Encourages settlement of principal tax liabilities, thereby increasing government revenue to support national development initiatives.
MAIN OBJECTIVES OF THE KSA TAX AMNESTY PROGRAM
- Increase Taxpayer Participation: Promote voluntary compliance by encouraging more taxpayers to regularize their Tax Status and settle outstanding dues.
- Rectify Tax Records: Enable businesses to correct past discrepancies such as delayed registrations or incorrect returns without incurring penalties.
- Enhance Administrative Efficiency: Reduce ZATCA’s administrative burden by resolving tax issues proactively and minimizing the need for audits or legal actions.
REQUIREMENTS TO BENEFIT FROM THE AMNESTY:
- Register with ZATCA (Zakat, Tax and Customs Authority).
- Submit all outstanding tax returns.
- Pay due taxes in full or apply for an approved instalment plan.
Taxpayers may request instalment plans for outstanding dues, with potential waivers for late payment penalties on amounts due after June 30, 2025.
EXAMPLE ON HOW COMPANIES CAN BENEFIT FROM SAUDI ARABIA’S TAX AMNESTY PROGRAM ON WITHHOLDING TAX IN SAUDI ARABIA
In Saudi Arabia, Withholding Tax (WHT) is imposed on payments made by resident entities to non-resident entities for services performed within the Kingdom. As part of Saudi Arabia’s destination-based taxation system, WHT is deducted at the source.
The WHT return should be submitted within 10 days of the following month of making the payment to the non-resident entity to avoid any penalties.
WITHHOLDING TAX (WHT) PENALTIES IN SAUDI ARABIA
- Late Payment Penalty: A fine of 1% of the unpaid tax is imposed for every 30 days of delay from the due date.
- Failure to File WHT Return: ZATCA may impose additional administrative fines for failure to file monthly WHT returns on time.
- Tax Evasion: If ZATCA determines that the taxpayer intentionally failed to withhold or report WHT, a penalty of up to 25% of the tax due may be imposed
EXAMPLE: CONSULTING SERVICES PROVIDED BY A NON-RESIDENT
A Saudi company, ABC Ltd., hires a non-resident consulting firm based in the United Kingdom to provide technical consulting services.
The total payment for the services is SAR 1,000,000. According to Saudi tax law, payments for technical and consulting services provided by a non-resident are subject to a 5% WHT rate.
Calculate the WHT:
- Gross payment to XYZ Consultants: SAR 1,000,000
- WHT rate: 5%
- WHT amount = SAR 1,000,000 × 5% = SAR 50,000
- Net Payment to the Non-Resident: = Gross payment – WHT
- Net payment = SAR 1,000,000 – SAR 50,000 = SAR 950,000
Per the scenario described, ABC Ltd. could obtain waivers of all applicable penalties through Saudi Arabia Tax Amnesty Program by meeting necessary requirements before 1 January 2025.
ABC Ltd. needs to meet ZATCA conditions for penalty relief by submitting outstanding returns and paying their principal tax obligations to obtain benefits from the exemption program.
For more information regarding how Creation Business Consultants can assist with Saudi tax advisory, compliance and services, contact us for expert tax advisory today!
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