New Tax & Financial Regulations in Saudi Arabia

Adel Daglas
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The Kingdom of Saudi Arabia has introduced several new tax and accounting regulations over the past few years. These regulations have significantly impacted finance functions in KSA by requiring businesses to become more transparent and accountable in their financial reporting. The government aims to bring Saudi Arabia in line with global standards on taxation and accounting, as well as reduce tax evasion by introducing more rigorous compliance measures.

Saudi Tax, Financial & Accounting Updates

The Saudi government has been actively pursuing updates to its current tax and accounting regulations, in order to make taxation more efficient and accurate, as well as reduce the overall burden on businesses. Here are some of the recent changes made.

Implementation of E-Invoicing

One of the most significant shake ups to Saudi's taxation regulations is the implementation of mandatory e-invoicing. This will require businesses with an applicable income exceeding 500 million Saudi Riyals to submit their invoices electronically, making it easier for the relevant authorities to track and audit their taxation payments.

To enable this process, the government has introduced a new platform called FATOORA. As of the 1st of January 2023, the Zakat, Tax and Customs Authority began implementing the second integration phase, which requires businesses selected as part of the first phase to continue to complete their e-invoicing procedures via FATOORA. During the second phase, some extra steps will be required, which include connecting taxpayers' electronic invoicing systems with that of the Authority's and issuing invoices electronically using an established format with several elements added for completion.

Updated RETT Regulations

The Zakat, Tax and Customs Authority (ZATCA) recently revised their Real Estate Transaction Tax Implementing Regulations to include several exemptions. Among the most noteworthy of these is a waiver granted when real estate is transferred from any individual to an approved off-plan sales or rent activities developer, as long as the property was created for future off-plan sale purposes.

For applicable circumstances, RETT will be implemented at the rate of 5% on real estate transferred from one entity to another via sale, trade-off, assignment, or donation. These modifications became effective as of August 2022.

Tax Amnesty Extended

The tax amnesty introduced in June last year will be extended until the 31st of May 2023. The amnesty was originally introduced to provide businesses with some breathing space in the wake of the COVID-19 pandemic, and allow them to pay off any overdue taxes without having to worry about facing penalties.

ZATCA has exempted all penalties associated with late registration, payment, and filing of taxes from their decision. This includes fines related to VAT returns due to incorrect e-invoicing regulations or for general violations. All applicable fees will be waived by the Authority.

Approved Amendments to the VAT Implementing Regulations

The Zakat, Tax and Customs Authority (ZATCA) of Saudi Arabia has recently revised Articles 33 and 34 and introduced a new Article 36 to the VAT Regulations (VATR). These amendments cover additional criteria for who can qualify for a 0% VAT rate and they adjust the wording in relation to two categories of organizations and activities on the exemption list.

This includes international passenger transportation and the provision of qualified military supplies to armed forces or government internal security departments. Notably, Article 34 has been revised to define a qualifying means of transport as any type of transport.

Saudi Arabia: Moving Towards a More Robust Tax and Accounting System

The recent changes to Saudi Arabia's tax and accounting regulations are an important step towards establishing a more robust financial system for the region. By introducing new, more stringent e-invoicing procedures, it will be easier for the government to monitor and audit taxation payments.

The government is taking proactive steps to ensure that businesses are able to comply with their taxes accurately and efficiently while operating at the forefront of digital taxation. The extended tax amnesty is also welcome news, as it will help businesses navigate this difficult period in a more secure financial environment.