Saudi Arabia extends tax amnesty initiative until 31 December 2023

Evolution of the Saudi tax amnesty program

In March 2020, the Zakat, Tax and Customs Authority (ZATCA) introduced the tax amnesty program as a supportive measure to mitigate the financial ramifications of the COVID-19 pandemic. This program aimed to provide businesses with some relief during uncertain economic times. The initiative has since been extended multiple times, with the most recent extension covering the period from 1 June 2023 to 31 December 2023.

 

Scope

This tax amnesty initiative applies to a range of taxes, including:

• Corporate Income Tax (CIT);
• Withholding Tax (WHT);
• Value-added Tax (VAT);
• Excise Tax;
• Real Estate Transaction Tax (RETT).

Taxpayers can benefit from a waiver in respect of the following penalties:

• Fines for late registration;
• Fines for delayed payment and tax return filing;
• VAT return amendment fines;
• VAT field detection and E-invoicing regulation violations fines.

Excluded Fines:

• Fines paid before 1 June 2022;
• Fines related to tax evasion; and
• Fines related to tax returns due after 1 June 2023.
  
  

Eligibility

Taxpayers must meet the following requirements to be eligible for the tax amnesty scheme:

• Registering with ZATCA for the relevant taxes;
• Submitting all outstanding tax returns; and
• Paying the corresponding tax liability or opting for an instalment plan.

It is important to note that taxpayers can pay their taxes in instalments under a ZATCA-approved plan, and they can enjoy a waiver for late payment penalties on instalments due after December 2023.

 

Relevance

The extension of the amnesty initiative provides a great opportunity for businesses. Not only can they rectify any discrepancies or errors in their tax records without facing hefty fines, but this initiative also provides business with the opportunity to start with a fresh slate.

Additionally, the program echoes Saudi Arabia's broader economic ambitions. By fostering a culture of financial transparency and responsibility, the country enhances its attractiveness to both domestic and international investors. As businesses rectify their tax position, the Saudi government is poised to benefit from increased tax collections, which can be reinvested in developmental projects and public services, promoting national growth and prosperity.

 

Recommendations

Before the tax amnesty period comes to an end, businesses operating in Saudi Arabia should evaluate their tax position and undertake the following measures:

• Review compliance practices: ensure your business is up to date with all tax regulations and requirements.

• Rectify discrepancies promptly: if there are any discrepancies or outstanding issues in your tax records, now is the time to address them.

• Consult with your tax advisor: consider talking to local tax experts, who can help review your tax submissions, assess your current tax status, and assist in applying for an instalment plan.

• Act quickly: with the deadline set for 31 December 2023, the window of opportunity is limited. Ensure your business has taken the necessary steps to benefit from the tax amnesty scheme before this date.
  
  

Conclusion

Saudi Arabia's renewed tax amnesty program, slated to conclude on December 31, 2023, provides an invaluable opportunity for businesses to align their operations with the Kingdom's tax regulations without the looming threat of penalties.

By proactively addressing and amending any discrepancies in tax records, businesses can not only avoid potential financial repercussions, but also fortify their financial position and reputation in the Kingdom. We strongly recommend that businesses with operations in Saudi Arabia seize this opportunity. Engaging with local tax specialists to thoroughly review and rectify tax positions can be a strategic move.