Vat Payment in Saudi Arabia

Every taxpayer must make the Value Added Tax (VAT) payment in Saudi Arabia before a due date prescribed by the Zakat, Tax and Customs Authority (ZATCA). Every taxpayer must be aware of each due date to comply with the rules. Regular compliance to the due dates can save you from the levy of penalties.

This article will explain everything about the VAT payment in KSA, including VAT late payment penalty, tax payments on imports, VAT payment by the government bodies, and extension for making VAT payment beyond due dates.

Who should make VAT payments in KSA?

Every taxpayer who is liable to be registered under the KSA VAT law must make VAT payment to the authority for each transfer of goods and services by him. Moreover, the recipients of goods and services are also liable to make VAT payments under reverse charge mechanisms. 

Self-assessed VAT payments

The self-assessed VAT payment refers to the amount of VAT liability calculated by the taxpayers at the end of each tax period. Taxpayers must make the self-assessed VAT payment in KSA before the due date prescribed by the authority.

Payment of VAT assessed by ZATCA 

When the authority specifically assesses the VAT liability, the authority issues an assessment order to the taxpayer. In such circumstances, the VAT payment must be made before the date mentioned in the notification of the assessment issued by ZATCA. 

Due date to pay VAT in Saudi Arabia for taxpayers

The due date for VAT payment in KSA is the last date of the month following the end of the tax period. It means every taxpayer in Saudi Arabia must pay the VAT before the last day of the month after the end of a tax period. Let’s calculate the due date of VAT payment with the help of an example: 

A taxpayer filed a quarterly VAT return for the tax period April 2021 to June 2021. His due date for VAT payment in KSA will be the last day of July 2021, i.e. 31st July 2021. 

Similarly, if a taxpayer filed a monthly VAT return for the tax period January 2021, his due date for VAT payment will be 28th February 2021. It means the taxpayer must pay the VAT before 28th February 2021. 

How must Saudi Arabian taxpayers make VAT payments in KSA?

The VAT KSA requires every taxpayer to make VAT payments online through the ZATCA portal. After filing each VAT return, the portal generates a SADAD invoice for the taxpayers that indicates the invoice number and the VAT amount to be payable.

SADAD payment system is a service system that allows Saudi Arabians to make payments of government obligations using various banking channels such as bank branches, ATMs, online banking, etc.

The ZATCA portal allows the following modes of payment for the VAT payment in KSA:

Late payment penalty for VAT KSA

The authority has prescribed the penalty for those taxpayers who fail to make VAT payments in KSA before the due date. In other words, the taxpayers making late payments will be penalised with the amount prescribed by the authority in KSA. 

VAT late payment penalty in KSA is 5% of the VAT amount due for each month or a part of the month. For example, if the VAT payment was due by 31st January and the taxpayer fails to pay the VAT before that date, he will have to pay the penalty at the rate of 5% of the VAT amount due each month or a part of the month.

Example:

A taxpayer was required to pay VAT for December amounting to SAR 2,000 before 31st January, but he paid VAT on 2nd April. In this case, the taxpayer will have to pay a 5% penalty of SAR 2,000 for three months (February, March and April).

He will pay SAR 300 (SAR 2,000 x 5% x 3months) as a penalty in addition to the VAT amount due for December.  

Tax payments on imports through tax returns

Saudi Customs collects import VAT on the items imported to KSA from the importer. As per the Common Customs Law in KSA, the importer must provide a customs declaration at the time of import of goods. 

Hence, the importer must make a VAT payment and any other duties or charges mentioned in the customs declaration through the Customs portal. 

VAT payment by government bodies

The government bodies must pay VAT on the taxable supplies they receive irrespective of whether the supply relates to economic or non-economic activities. Therefore, the supply of goods or services to government bodies will be chargeable to VAT.

If the government bodies receive goods or services under the place of supply rules from non-residents, then the VAT payment is made considering the following two situations:

• The non-resident supplier will register and make VAT payment if the government body is not registered or the supply only refers to the public authority’s activities.
• When a government body is registered for VAT, and the supply relates to economic activity, it will record VAT chargeable as per the reverse charge mechanism rules and make a VAT payment. 

Extension for making VAT payments beyond due dates

A taxpayer can request ZATCA to pay VAT beyond the due date under exceptional circumstances by writing to the authority with the necessary information. The request letter to the authority must include the following details: 

• Amount of VAT
• Tax period related to the amount of VAT
• The reason that why VAT payment before the due date would not be possible

The authority will then assess the reasons and reply within 20 days that the request is approved or rejected. Until the authority approves the extension request, the due date will be considered final for VAT payment in KSA.

In a nutshell, the taxpayers must make the VAT payment in KSA before the due dates to save VAT late payment penalties. However, if VAT payment seems impossible due to exceptional circumstances or the taxpayers find hardship in making VAT payment, the authority may allow an extension to pay VAT beyond due dates upon a written request by the taxpayers.