Tax Insights

Navigating Tax In A Digital World

Adel Daglas
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Taxation in Saudi Arabia is constantly evolving as the government looks for new ways to generate revenue and promote economic development. As a country that has traditionally avoided taxation, the new Saudi tax system is still in its infancy. However, the government is committed to modernising the tax system and making it more efficient. In recent years, there has been a concerted effort towards the increased digitisation of both commercial and government interactions.

This has included the launch of government e-services such as Absher, where Saudis and expatriate residents can now perform over 160 tasks online, such as renewing their drivers’ licence or paying traffic fines. These initiatives are part of the government’s Vision 2030 plan, which aims to make Saudi Arabia a more attractive place to do business. As part of this transformation, the government is looking for ways to streamline the tax system and make it more efficient.

What Is Digital Transformation?

Digital transformation is the process of using digital technologies to create new or different business processes, customer experiences, and value propositions. The main goal of this transformation is to improve the efficiency and effectiveness of organisations. In Saudi Arabia, the COVID-19 pandemic accelerated the pace of digital transformation as businesses looked for ways to continue operating during the lockdown.

As businesses move online, the government is also following suit. One area that is ripe for digitisation is the tax system. The government is keen to promote the nation globally as a country where doing business is easy, and part of that is making the tax system straightforward, accessible, and transparent. With the assistance of technology, the government hopes to achieve this goal.

How Can Digitisation Impact The Tax Landscape In KSA?

The Saudi government is focused on the continued diversification of its economy, and taxation is one area where it is looking to make reforms. To this end, the government has introduced several reforms in recent years, including value-added tax (VAT), excise tax, e-invoicing in addition to a 20% Corporate Income Tax for businesses, which has been in effect for over 15 years.

The government's orientations towards digital transformation, including electronic invoicing, is considered a very important step in the digital world and has many benefits, such as reducing the number of papers used for documentation purposes as well as storing transaction information. Through electronic invoicing, sellers can also remove manual processes such as the printing, mailing, storage, and reconciliation of paper documentation. The adoption of electronic invoicing standards allows for fast and efficient data transfer, thus reducing the time taken in the billing process cycle. This is in addition to increasing tax control by the tax authorities on taxpayers and enhancing transparency between the Saudi tax authority, tax and zakat payers alike.

Digital transformation can also help Saudi tax authorities improve tax compliance and collections while reducing the costs of administering the tax system. It can also create a more user-friendly tax system that is easier for taxpayers to adhere to. The Saudi government has already made some progress in digital transformation by launching e-services such as e-filing/e-payment and e-invoicing. However, there is still some way to go before the tax system is fully digitised.

What Does The Future Hold?

The Saudi government is committed to the continued modernisation of the tax system. In the future, we can expect to see further digitisation in this area with the possibility of new taxes being introduced. The government is also likely to continue its efforts to improve tax compliance and collections. With the assistance of technology, Saudi tax authorities can continue to make the entire system more efficient and user-friendly, ensuring ease for businesses to operate in the Kingdom. It's a time of rapid progress for the tax landscape in Saudi Arabia, and businesses that are able to adapt to the changing environment will be well-positioned to take advantage of the opportunities that arise.

To discuss the insights and its implication to you, contact Adel Daglas.