9. Compliance and assessment

This section discusses the compliance requirements of KSA businesses in scope, and how they are assessed.

Tax returns for a corporation must be filed online with the tax authorities within 120 days from the fiscal year-end. A taxpayer whose taxable income exceeds SAR 1 million before the deduction of expenses must have the accuracy of the return certified by a licensed certified accountant.

Additionally, audited financial statements must generally be filed with the Ministry of Commerce within 120 days of the year-end.

The tax year of a taxpayer starts from the date it obtains a commercial registration or license, unless other documents support a different date. The tax year is the state’s fiscal year.

A taxpayer may use a different tax year in the following circumstances:

  • the taxpayer uses a Gregorian financial year; or
  • the taxpayer is a member of a group of companies or a branch of a foreign company that uses a different financial year.

Consolidated returns must be filed for Zakat purposes in the case of wholly owned subsidiaries. Consolidated returns are not permitted for income tax purposes.

GAZT has published transfer pricing By-Laws (“TP By-Laws”) for the KSA. The TP Bylaws apply to all related party transactions concluded by taxable persons. The rules cover both cross border and domestic transactions. The Income Tax Law and TP By-Laws allow the tax authorities to examine related party transactions, request relevant documentation and adjust income or expenses based on the arm’s length standard.

The tax authorities may also impose penalties for non-compliance of the corporate taxes. The penalties for failure to file a tax return are the higher of 1% of revenue (up to a maximum of SAR 20,000), or between 5% and 25% of the unsettled tax, depending on the length of the delay. In addition, there is a fine of 1% of the unsettled tax for every 30 days' delay in settlement.

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