Tax Update – Saudi Arabia introduces a tax amnesty to cancel tax penalties

On 1 June 2022 the Saudi Arabian tax authority, the Zakat, Tax and Customs Authority (“ZATCA”) introduced a new tax amnesty scheme (“New Amnesty Scheme”).  The New Tax Amnesty Scheme, which has been implemented less than a year after the previous amnesty scheme expired, is effective from 1 June 2022 until 30 November 2022.

The New Amnesty Scheme aims to mitigate the economic and financial effects of the Covid-19 pandemic.

Key features

Although further details are expected to follow in due course, the New Tax Amnesty Scheme has similar features to the previous tax amnesty scheme.  The key features are as follows:

Benefits

• Upon ZATCA’s approval, the applicant will be exempt from penalties for late tax registration, late payment of any tax, late submission of any tax returns, fines for amendment of a VAT return, and fines arising from field audit violations relating to VAT or from electronic invoicing.

Requirements

• To benefit from the tax amnesty, applicants are required to register with ZATCA if unregistered, to submit all tax returns, to declare all payable taxes, to pay the principal of all taxes due and to pay all instalments in time (if any instalment plan has been agreed with ZATCA).

Procedure

• Applicants who wish to benefit from the tax amnesty should ensure that they meet all the requirements and make the application to ZATCA no later than 30 November 2022.  Although it is unclear at this stage, it is likely that the tax amnesty will not apply unless ZATCA approves it by 30 November 2022.
• Applicants may propose to ZATCA to pay the taxes due under an instalment plan, however ZATCA must approve the instalment plan by 30 November 2022.  Payments under the instalment plan can extend beyond 30 November 2022, however to incentivise prompt payment ZATCA will apply delay payment penalties in respect of those amounts paid after 30 November 2022.

Exclusions

• The tax amnesty will not apply to penalties paid before 1 June 2022, to penalties relating to tax evasion, and to late payment penalties which the applicant agreed to pay under an instalment plan that straddles 30 November 2022.
• It is unclear at this stage whether the tax amnesty will affect ongoing tax cases before the Tax Committees. It is our expectation that penalties imposed through an assessment which is under dispute may be cancelled, provided that the taxpayer settles the principal tax assessed in full and withdraws the appeal. Further details are expected in due course.

 How does it affect me?

The re-introduction of a tax amnesty in Saudi Arabia is a unique opportunity for businesses to regularise their tax affairs without any penalties for historical non-compliance.

We will be publish a more comprehensive analysis on the New Tax Amnesty Scheme once more detail is available.

What should I do next?

Our multiple award-winning Tax team is here to help. With their expertise and significant experience of tax matters across the Middle East and all industry sectors, they are well placed to assess the impact of the tax amnesty on your organisation and assist with your tax requirements in Saudi Arabia.

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