Monitoring the Tax impact of COVID-19

New VAT incentives announced in KSA

Further to our update published on 26 March on the measures announced by the Government of the Kingdom of Saudi Arabia (KSA) to mitigate the economic and development impacts due to Covid-19 on the private sector, General Authority of Zakat and Tax (GAZT) has announced the launch of several incentives aimed at stimulating the economy and supporting taxpayers. These incentives are in line with the Royal Decree No. 45089 dated 18 March 2020, Ministry of Finance (MoF) resolution announcement, and the International Monetary Fund recommendations for tax authorities worldwide. In particular, there is now a scope for businesses that may have had a registration obligation but have failed to do so, to now register for Value Added Tax (VAT) without the concern of penalties applying.

We have provided a summary of the specific incentives in relation to VAT – these incentives offer taxpayers an unprecedented window of opportunity to take advantage of significant penalty reliefs. We recommend that all taxpayers revisit their previous returns and take this opportunity to disclose any historic omissions or errors, as this is a unique opportunity to be able to do so. Please note that the window to carry out these disclosures will be closed after 30 June – therefore time is of the essence.

Eligibility and timeframe: 
  • These benefits are extended to all taxpayers who are registered or required to be registered under the KSA VAT legislations.
  • This includes any non-resident person who is obligated to pay VAT in the KSA. 
  • Any VAT registration and/or return amendment made during the period March 18 2020 to June 30 2020 would be eligible for these benefits.
Late registration:
  • For all entities that should have registered for VAT in KSA before March 18 2020, no late registration penalties will be imposed for applications received between 18 March and 30 June 2020. This applies to non-resident taxpayers as well.
Returns and voluntary disclosures: 
  • Any VAT return that should have been filed before 18 March 2020 can now be filed without incurring a late filing penalty, up until 30 June 2020.
  • All taxpayers can make corrections on previously submitted VAT returns without incurring any penalties up until 30 June 2020. 
    • Taxpayers can apply to make payments for understated tax by installments, however, the request to pay by installments must be made during the initiative period. GAZT has confirmed that no penalty will be imposed until 30 June 2020, but it will calculate the late payment penalty for the unpaid portion starting from 1 July 2020 until the date of the actual payment. 
  • VAT returns can also be amended for periods which have already been audited by the GAZT. 
    • In the event that the return is under an ongoing audit, the amendment can be made through contacting GAZT directly.
  • GAZT will not cancel any penalties imposed before the date of the initiative. 
    • The cancellation of penalties only relates to voluntary disclosures made during the initiative period, provided that the amounts due on the disclosure are paid before the end date of the initiative. 
  • Requests for refunds as a result of VAT return amendments will not be accepted under this initiative, and will be processed in line with the provisions under the KSA VAT Legislation. 
    • To claim the benefit under these announcements, all the additional liabilities should be paid before 1 July 2020.
Next steps

The above measures are unlikely to be extended beyond the end of June 2020, therefore, we strongly suggest that taxpayers review their current and historic VAT position to ensure that their compliance and tax affairs are in order in good time.

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