Learn about income tax filing in Saudi Arabia, who is liable, why it’s crucial for businesses and investors, and how to file on time to avoid penalties.
Income tax filing is a financial responsibility of business owners, legal residents, and foreign investors, so it should not be ignored. If you are new to the term ‘income tax’ or find it a complicated process, do not worry. We have got you covered.
This blog will briefly explain income tax filing, the importance of filing. Let’s dive into the details!
What is Income Tax Filing?
Income tax filing is a process in which you officially report your income, taxes, and expenses to the government for a certain financial year. This is done by submitting a document called an Income Tax Return (ITR) to the applicable authority.
Who is Liable to Income Tax in KSA?
In Saudi Arabia, there is no tax on personal income. However, non-Saudi investors are liable for income tax. As per the income tax law, the following persons are liable to income tax:
- A resident capital company owned by non-Saudi persons operating in hydrocarbon and oil production
- A resident non-Saudi person who carries on activities in Saudi Arabia
- A non-resident individual who uses a permanent establishment (PE) to do business in Saudi Arabia
- A non-resident individual without a PE who has additional income from Saudi Arabian sources that is taxable
- Someone who works in the natural gas investing industry
- Someone who produces oil and other hydrocarbons
Why Income Tax Filing is Important?
Here are the key benefits of filing income tax in Saudi Arabia:
- Income tax filing ensures that you are following the ZATCA (Zakat, Tax and Customs Authority) regulations
- Help you avoid business disruption, penalties, license suspension, and blacklisting
- Enhance business credibility, transparency, and trust if a business files its taxes regularly
- Allow access to work permit approvals, business visa applications, import/export licenses, and commercial registration renewal
- Keeps your financial documents auditable and organized
How to File Income Tax in KSA?
Five key points should be kept in mind while filing income tax:
- Eligible businesses or individuals must register with the Zakat, Tax and Customs Authority (ZATCA)
- Collection of financial information, including expenses, tax invoices, tax inputs, and outputs
- Tax return preparation through the Authority’s electronic portal
- Before submission, you must review the data to avoid delays and errors
- To avoid fines, taxes should be paid before the deadlines
Penalties and Risk of Not Filing Income Tax
The penalties and risks associated with non-filing income tax include fines imposed by the authority for late submission or providing incorrect information. The other risk is the suspension of a license for non-compliance. If any establishment does not comply with regulations, it can face penalties up to the seizure of assets.
Tips for Filing Income Tax
The following are the tips for filing income tax that may help:
- Keep checking deadlines to avoid penalties
- To ensure full compliance, hire a chartered accountant or tax expert
- Track revenues and expenses by using modern accounting systems
- For a smooth return process, maintain accurate financial records
BMS Auditing: Dependable, Exceptional Tax Support
Ensure your business stays compliant with Saudi Arabia’s income tax regulations. Contact BMS Auditing today for expert guidance on filing your income tax and avoiding penalties, helping you grow your business with confidence in the KSA market.
