Businesses could face SAR 10,000 fine for VAT violations

Saudi Arabia’s General Authority of Zakat and Tax (GAZT) will start on January 1 imposing penalties on businesses that have not registered for the tax in due time, it said in a recent statement.

The penalties include a SAR 10,000 fine for failure to register on time, the suspension of government services, in addition to other penalties due to failure to file VAT returns and to pay VAT on time, it added.

The authority clarified that the penalty for failure to pay VAT on time will be 5 percent of the VAT amount due for each month, while the failure to file VAT return on time will result in a fine, not less than 5 percent and not more than 25 percent of the VAT amount due.

VAT due on late registered businesses will be calculated from the date of VAT implementation (Jan. 1, 2018) as all penalties and fines will be effective from this date, the statement said.

The VAT registration deadline for businesses, with annual revenues between SAR 375,000 and SAR 1,000,000, expired on Dec. 20.

VAT registration is optional for businesses with annual revenues between SAR 187,500 and SAR 375,000, while businesses with annual revenues less than SAR 187,500 are exempted from registration.

GAZT also confirmed that majority of the businesses were ready for the launch of VAT on Jan. 1, in terms of employee training, compliance with VAT Law and implementing regulations, installation of VAT accounting and IT systems, and proper record management and documentation in accordance with the required forms.

In November, GAZT said Saudi entities were not entitled to collect VAT or issue related invoices ahead of Jan. 1, and any tax collected should be returned immediately to avoid potential penalties or fines.