Support
6 Days a Week
Training
Free On Premise
Free Consultancy
Accounts & VAT
6 Days a Week
Free On Premise
Accounts & VAT
For businesses making payments to non-resident entities, filing Withholding Tax Returns in Saudi Arabia is a duty. Small business or multinational company, it is important to know the process to avoid penalties and comply with Zakat, Tax, and Customs Authority (ZATCA) regulations. The tax is applicable on payments made for services rendered by non-residents and businesses must deduct it at the source before transfer of funds.
According to ZATCA guidelines, businesses in Saudi Arabia are required to file Withholding Tax Returns within 10 days of deduction. Along with proper documentation and tax reporting, companies must also have their invoicing processes in line with the latest regulations in E-invoicing in Saudi Arabia. In cities like E-invoicing in Riyadh, new digital compliance measures have been put in place, and businesses need to keep up to date with the latest in order to file their tax returns without hassle and without any unnecessary fines.
Saudi Arabia is a destination based taxation country, and therefore any income earned in the Kingdom is taxable, regardless of the recipient’s residency. It is applicable to payments made by Saudi businesses to non-resident entities for services rendered partly or wholly in Saudi Arabia. The tax is deducted at source before the payment is transferred to the non-resident, and the Saudi entity is responsible for remitting the tax to ZATCA and filing thereof.
The rates depend on the type of payment.
If any resident entity (company or business) is making any payment to non-resident then:
Withholding Tax Returns in Saudi Arabia help businesses avoid penalties and keep the financials of the business running smoothly.
In Saudi Arabia companies are required to file two types of Withholding Tax Returns, monthly return (due within 10 days of the month end) and annual return (due within 120 days of the fiscal year end). Annual return must be filed by partnerships within 60 days from the end of the fiscal year.
Steps to File a Withholding Tax Return:
1. Access the ZATCA Portal
Log in with your credentials to the tax portal on the Zakat, Tax, and Customs Authority (ZATCA) website and visit the Zakat, Tax, and Customs Authority (ZATCA) website.
2. Navigate to Returns
After logging in, go to “Returns section”. Then, click on View Returns, and then choose Monthly Withholding Tax.
3. Create a New Return
To start a new return submission, click on the “New Monthly Withholding Tax Return” button.
4. Complete the Form
Enter the non-resident beneficiary’s information, payment type, amount and the amount of tax withheld.
5. Submit the Return
Submit the form after completing it through the ZATCA portal for review and processing of your withholding tax return.
6. Receive Confirmation
After submitting, you will receive confirmation receipt, a copy of the return and a bill for the paid tax.
The withheld tax in Saudi Arabia should be paid by the Zakat, Tax, and Customs Authority (ZATCA) within 10 days after the end of the month in which the payment was made to a non-resident. For example, if a non-resident is paid on January 15, the tax has to be remitted by February 1. Payment at the right time helps businesses remain in continuation with tax regulations and avoid getting into a penalty.
Businesses are given 29 days’ grace period from the original due date, but penalties start to accrue from the 40th day. In order to avoid wasted costs and sufficient financial operations, one has to keep a check on these deadlines.
1. Deduct the Withholding at Payment
When making payment to the non-resident entity, deduct the applicable withholding tax amount.
2. Log in to ZATCA Platform
You can access the ZATCA online portal using your login credentials to start the tax payment process.
3. Go to Returns or Payment Section
Go to the “Returns” or “Payment” section and select “Monthly Withholding Tax” in the platform.
4. Provide Payment Details
Provide information about the non-resident including payment type, amount and the tax withheld.
5. Remit Tax Using Approved Methods
You can submit the withholding tax using approved payment methods such as SADAD, Mada or direct bank transfer.
6. Obtain Receipt and Proof
After paying, check that you get a receipt, the tax return, and an invoice as proof of compliance.
1. Late Payment Penalty
For each 30 days after the due date, a penalty of 1 percent of the unpaid tax is imposed.
2. Misreporting Penalty
If the tax is found to be false or if there is tax evasion, a 25% penalty is applied on the unpaid tax.
3. Additional Actions
This can further result in legal consequences or inability to establish the existence of a tax treaty for purposes of claiming benefits.
The common errors to avoid when filing Withholding Tax (WHT) in Saudi Arabia are as follows:
1. Incorrect Identification of Withholding Person
The entity that should be registered as the withholding person in the system must be checked. Filing can be rejected if the wrong entity is designated and the tax liabilities may go unpaid with associated penalties or audits. Before you submit your return, double check the registered taxpayer details to avoid this problem.
2. Incorrect Tax Rate Application
There are different rates of withholding tax for each type of income. Underpayment or overpayment of taxes can result from using the wrong rate. For instance, the rates for dividends, royalties and management fees are different. To ensure compliance and not pay more or less than is owed, always verify the correct tax rate based on the payment type.
3. Incorrect Taxable Amount Calculation
Tax rate should then be applied on the taxable amount. An inaccurate withholding tax returns may result from incorrect calculations. Make sure that the taxable amount is based on the total payment made, less any exempt amounts or allowable expenses. Penalties, fines, or having to pay additional taxes may be the outcome of getting those numbers wrong.
4. Late Filing and Payment
There are strict deadlines for filing and payment in Saudi Arabia. Penalties will be incurred for late submissions or payments. Make sure to file your returns by the 10th of the ensuing month and make payments as soon as possible. If the payments are not made on time, the penalties begin to accrue from the 40th day after the due date. To avoid these fines, keep a watch on due dates.
In conclusion, businesses must file Withholding Tax Returns in Saudi Arabia with ZATCA. Companies should know how to file, be on time, and do not make a mistake because then they can keep the tax process clean and keep a good impression with the tax authorities. Payment is good on time, and reporting is accurate, otherwise tax calculating mistakes or filing mistakes can cost you a lot in fines or even in the law suit.
To keep abreast with the current Withholding Tax Returns guidelines and avail of the tools like ZATCA portal for easy submission. This can all be managed just fine if businesses have proper planning and a lot of attention to detail thereby avoiding costly mistakes. Following the required steps consistently will help you to file accurate and compliant withholding tax return in Saudi Arabia.
Comments are closed