VAT and zakat for a new company

When a company is registered with the Ministry of Commerce, ZATCA generates its taxpayer identification number. The company then signs in to ZATCA's portal to complete its initial registration. VAT is a separate step, decided by the company's sales.

• Mandatory: when taxable supplies over the past 12 months exceed SAR 375,000, or are expected to exceed it over the next 12 months. The company must apply within 30 days of the end of the month in which that happens.
• Voluntary: from SAR 187,500 of taxable supplies or taxable expenses in a 12-month period.
• Penalty: ZATCA lists a SAR 10,000 penalty for failing to apply for registration.

The standard rate is 15%. Some supplies are zero-rated and some are exempt.

The VAT Implementing Regulations set the tax period: monthly if annual taxable supplies exceed SAR 40 million, and three months (quarterly) for everyone else. The return and the payment are both due by the last day of the month after the period ends.

• Late return: 5% to 25% of the tax that should have been declared
• Late payment: 5% of the unpaid tax for each month or part of a month

Invoices and records must be kept for at least six years from the end of the tax period they relate to.

• Phase 1 (generation): since 4 December 2021, every resident taxpayer issues invoices through a compliant electronic solution. Handwritten invoices, invoices typed in a text editor, and scanned or copied paper invoices do not count. Simplified (business-to-consumer) invoices must carry a QR code.
• Phase 2 (integration): since 1 January 2023, taxpayers connect their e-invoicing solution to ZATCA's systems in waves, with at least six months' notice for each. Wave 25 covers taxpayers whose VAT-subject revenues exceeded SAR 187,500 in 2022, 2023, 2024 or 2025, who must integrate by 1 February 2027.

In a resident company, each owner's share is treated on its own:

• The share of Saudi owners (including GCC nationals treated as Saudis) is subject to zakat, at 2.5% of the zakat base.
• The share of non-Saudi owners is subject to corporate income tax; ZATCA's guidance gives the rate for a resident capital company as 20% of the tax base.

A company with both Saudi and foreign owners pays both, each on its owners' share. The zakat or income-tax return, and the amount due, are filed within 120 days of the end of the financial year.

When the company pays a non-resident, it may have to withhold tax and pay it to ZATCA by the 10th of the following month. ZATCA's guideline sets rates from 5% to 20% depending on the payment: for example 5% on dividends, rent and technical or consulting services, 15% on royalties, and 20% on management fees.

Mohla is not a tax adviser and does not prepare returns; your accountant does. Mohla Comply makes sure the dates are never missed: your VAT, withholding and zakat or income-tax due dates sit on your 12-month calendar, with reminders before each one, and Mohla's team checks ZATCA regularly for fines.

Mohla's own fee is in the written quote you receive before any work starts.