VAT payment in Saudi Arabia

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Tally Solutions, Feb-04-2020

An important obligation of persons registered under VAT is to pay the tax due on supplies made by them. Payment of the correct amount of tax by the relevant due date is very important, in order to avoid heavy penalties for non-compliance. In this article, let us understand how to pay tax under VAT in Saudi Arabia.

When should VAT be paid in Saudi Arabia?

A person registered under VAT is required to pay tax relating to a tax period by the last day of the month following the end of the tax period. Let us understand this with few examples:

Example: A business filing monthly VAT returns has to pay VATtax for the tax period of June '18 by 31st July '18. Similarly, a business filing quarterly tax returns has to pay tax for the tax period of July to September by 31st October '18.

A point to note for businesses is that VAT must be paid by the relevant due date for the tax period, irrespective of whether the date is a working day or a non-working day.

How should VAT be paid in Saudi Arabia?

Taxpayers should make the payment of tax to the designated bank account of the GAZT (General Authority of Zakat and Tax) via a bank transfer using the SADAD payment system. The SADAD payment system is an easy and safe method to make payments via the internet. Any person who has an account in a Saudi bank can create a SADAD account through the bank’s online services.

What is the penalty for non-payment of VAT?

A person who fails to pay the VAT due for a tax period will be liable to pay a fine of 5% of the value of the unpaid tax for each month.

Can a person request for extension in the date of VAT payment?

Yes, a registered taxpayer can request for an extension in the due date for VAT payment, in case it is not possible to pay VAT when it is due or it is difficult to pay the amount in a single instalment. For this, the person has to request the GAZT for an extension in writing, specifying the following details:

  • The amount of VAT to be paid

  • The tax periods for which the VAT is to be paid

  • Reason for seeking an extension in the due date

The GAZT will verify and approve or reject the request within 20 days. If the request for extension of due date for payment is approved, the GAZT will also notify the amount and due date of each instalment to be paid along with the tax period to which each instalment will relate. If the request for extension is rejected, the taxable person will be required to make immediate payment of the VAT amount.

Businesses should note that even if the request for extension of due date for VAT payment is approved, the penalty for non-payment of VAT by the original due date will still be levied.

Hence, registered taxpayers should note that the due date for payment of tax is based on their tax filing period. VAT Payment should be done by the due date to avoid unnecessary levy of penalty, which will affect the cash flow of the business. In case payment of VAT due is not possible, the VAT rules provide for the facility to seek an extension in the due date for tax VAT payment.

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