How should VAT records be maintained in Saudi Arabia?

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Tally Solutions, Feb-04-2020

Every person registered under VAT in Saudi Arabia should maintain records of their business, including invoices, books, and accounting documents. The GAZT (General Authority of Zakat and Tax) has specified the manner in which taxpayers should maintain these accounts and records. Let us understand the rules laid down for the manner in which VAT records should be maintained in Saudi Arabia.

Which language should be used in the records?

VAT records should be maintained by taxpayers in Arabic. Tax invoices should be issued in Arabic, in addition to any other language also shown on the tax invoices as a translation.

Where should the records be kept?

The VAT records should be kept in Saudi Arabia, either physically or through access to the relevant server where these records are stored. This is also applicable for non-resident taxpayers, in whose case their designated tax representative is responsible for maintaining their VAT records. If a taxpayer stores the VAT records electronically, certain conditions which are laid down, should be met. We will discuss these in our article 'Conditions for maintaining VAT records electronically'.

What is the time period to retain VAT records?

Taxpayers should retain invoices, books, records and accounting documents for a minimum period of 6 years from the end of the tax period to which they relate.

Example: Tax records of a business pertaining to May 2018 should be retained until December 2024.

Records pertaining to capital assets should be kept for a minimum of the adjustment period for these capital assets. The adjustment period for tangible and intangible assets is 6 years and for immovable assets like real estate is 10 years. Note that this is in addition to 5 years from the date of purchase of the capital asset.

 Example: Tax records pertaining to machinery purchased by a business on 10th May 2018 should be retained until 10th May 2029. Similarly, records pertaining to a building purchased by a business on 10th June 2019 should be retained until 10th June 2034.

Penalty for non-maintenance of VAT records

Violation

Penalty

A person who has not kept tax invoices, books, records and accounting documents for a specified period

SAR 50,000 or less per tax period

It is evident that a person who fails to maintain VAT records of their business will have to pay a high penalty. Hence, persons registered under VAT should take the required measures to ensure that relevant documents are maintained and stored in a secure and accessible manner, keeping in mind the rules explained above. The above rules should assist businesses in evaluating and choosing an effective software that will assist them to create and store Tax records as well as recall past records, wherever required. Use of an appropriate software will go a long way in making compliance under VAT easy, as well as automate compliance tasks, resulting in greater business efficiency.