Tax Assessment, Reassessment, and Late Payment Penalties in Saudi Arabia
Tax assessment is the process of determining the amount of taxes that an individual or company owes to the government, represented by the General Authority for Zakat and Tax (GAZT) in Saudi Arabia. Tax assessment is carried out by GAZT based on the information available to it that enables it to calculate zakat and tax on institutions and companies.
Methods for Evaluating the Amount of Zakat and Income Tax on Taxpayers in Saudi Arabia
GAZT uses a variety of methods to assess zakat and income tax, including:
- Estimated or self-assessment: GAZT estimates the amount of zakat for individual institutions based on a set of criteria related to the volume of sales, the volume of imports, and the number of employees in the establishment. This type of assessment is for establishments that are not required to submit audited financial statements.
- Assessment based on regular accounts and accounting audits: GAZT opens regular account declarations to be submitted by the legal accountant and approved based on audited financial statements, which the accountant uses to calculate the value of zakat on the company based on an independent professional opinion. GAZT’s system then calculates the amount of zakat owed by the taxpayer, and the taxpayer pays the amount of zakat.
Reassessment
If GAZT finds that a taxpayer has misreported their tax liability, it may initiate a reassessment. This process involves reviewing the taxpayer’s records and documentation to determine the correct amount of tax owed. If the reassessment results in a higher tax liability, the taxpayer will be required to pay the additional amount.
Late Payment Penalties
Taxpayers who fail to pay their taxes on time are subject to late payment penalties. These penalties are calculated as a percentage of the amount of tax owed, and they can be significant. For example, the late payment penalty for income tax is 5% per month, up to a maximum of 25%.
Conclusion
Tax assessment is a complex process that can have a significant impact on taxpayers. It is important for taxpayers to understand the different methods that GAZT uses to assess tax liability, as well as the potential consequences of late payment.
Request for additional information and cases of examination of Zakat and tax declarations
In some cases, the General Authority of Zakat and Tax (GAZT) may request additional information from taxpayers related to Zakat or tax declarations that they have disclosed in the past. This is done to verify the information provided by the taxpayer and to verify the amount of Zakat due on the establishments as a result of submitting the declarations. This procedure is carried out in a systematic way, where the establishment is subject to audit and examination. The examination and verification cases may take more than a month, and based on them, the Authority issues an opinion on the validity of the financial data and then issues a preliminary assessment of the case.
GAZT may re-evaluate the tax liability of an individual, institution, or company if their circumstances change or if there is an error in the original evaluation. For example, if an individual or company receives an unexpected profit, GAZT may re-evaluate the tax liability of the individual or company to include the profit.
GAZT may also re-evaluate the tax liability of an individual or company if there is an error in the original evaluation. For example, if an individual or company miscalculates their tax liability, GAZT may re-evaluate the tax liability to correct the error.
Cases of examination, preliminary and final evaluation, and Zakat and tax invoice
After the completion of the examination of all the data that the Authority requests from the taxpayer, a preliminary assessment is made by an employee of the General Authority of Zakat and Tax. There are two results of this evaluation:
- The examination process has ended and there is no need to modify the data.
- The examination case ended with a preliminary assessment on the taxpayer.
Translation:
Request for additional information and cases of examination of Zakat and tax declarations
In some cases, the General Authority of Zakat and Tax (GAZT) may request additional information from taxpayers related to Zakat or tax declarations that they have disclosed in the past. This is done to verify the information provided by the taxpayer and to verify the amount of Zakat due on the establishments as a result of submitting the declarations.
This procedure is carried out in a systematic way, where the establishment is subject to audit and examination. The examination and verification cases may take more than a month, and based on them, the Authority issues an opinion on the validity of the financial data and then issues a preliminary assessment of the case.
GAZT may re-evaluate the tax liability of an individual, institution, or company if their circumstances change or if there is an error in the original evaluation. For example, if an individual or company receives an unexpected profit, GAZT may re-evaluate the tax liability of the individual or company to include the profit.
GAZT may also re-evaluate the tax liability of an individual or company if there is an error in the original evaluation. For example, if an individual or company miscalculates their tax liability, GAZT may re-evaluate the tax liability to correct the error.
Cases of examination, preliminary and final evaluation, and Zakat and tax invoice
After the completion of the examination of all the data that the Authority requests from the taxpayer, a preliminary assessment is made by an employee of the General Authority of Zakat and Tax. There are two results of this evaluation:
- The examination process has ended and there is no need to modify the data.
- The examination case ended with a preliminary assessment on the taxpayer.
Additional notes:
- The term “GAZT” is the Arabic acronym for the General Authority of Zakat and Tax.
- The term “Zakat” is an Islamic tax that is levied on certain types of wealth.
- The term “tax” refers to any tax or duty imposed by a government.
Initial evaluation of inspection cases
If the employee of the Zakat, Tax and Customs Authority concludes that there are outstanding zakat or tax differences due to the taxpayer, a preliminary linking memorandum will be issued to the taxpayer’s account. The taxpayer can submit supporting documents for his position or entitlement to the authority within two weeks of the issuance of this document to object to the linkage memorandum.
Final evaluation of inspection cases
If the deadline expires, whether the taxpayer provides the Zakat, Tax and Customs Authority with documents that prove his entitlement or not, the Authority will issue a final assessment based on the conclusions it reached from the regulatory documents and the additional documents that were provided to it during the inspection and auditing process.
Final zakat linking and issuance of zakat invoice
- After the Zakat, Tax and Customs Authority audits the tax returns of individuals and companies and opens inspection cases to make sure that they have been submitted correctly and that the amount of zakat and tax paid is correct. Then, a re-linking memorandum will be issued to the taxpayer in case of zakat and tax differences. The invoice will be issued and become due for payment within the regular payment period and will be available on the Zakat and Tax Authority platform for payment.
Objection to the link at the Zakat, Tax and Customs Authority
The taxpayer may object to the final assessment at the Zakat, Tax and Customs Authority within 60 days of the date of issuance of the final assessment or the zakat linking invoice.
Late payment fines and penalties
If an individual or company fails to pay their taxes on time, they may be subject to late payment penalties. Late penalties are calculated as a percentage of the outstanding tax liability. The percentage of the late penalty depends on the amount of taxes due and the number of days the taxes are late. Penalties and late payment fines are imposed on foreign companies and foreign partners in Saudi companies, and late penalties are not imposed on recalculation of zakat or on zakat due to the Authority.
Rejection of the objection at the Zakat, Tax and Customs Authority on re-linking
After the objection is rejected at the Zakat, Tax and Customs Authority, the taxpayer may object to the General Secretariat of the Tax and Zakat Committees within a maximum period of 30 days.
If you are an individual or company in the Kingdom of Saudi Arabia, it is important to be aware of the procedures for assessing taxes, re-assessing taxes and zakat, and late payment penalties. By understanding these procedures, you can help ensure compliance with the law and avoid penalties.
We hope that we have provided an understanding of the assessment of taxes, zakat, re-assessment of taxes and zakat, and late payment penalties in the Kingdom of Saudi Arabia.
I have tried to be as accurate and comprehensive as possible in my translation. I have also included some additional information that I believe is important for understanding the topic.
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