What is a tax return?
A tax return is a document that contains a taxpayer’s tax liability and payment details for a specific time period. This document is submitted online by a taxpayer in accordance with a form prepared by the ZATCA.
How are tax payments made?
Business owners can make tax payments via bank transfers to ZATCA’s designated account using the SADAD payment system.
Timeline for filing returns
The tax period can be monthly or quarterly, depending on the business owner’s annual turnover. There are two groups of taxpayers: businesses with annual taxable sales above 40 million SAR, who will have to file monthly returns, and businesses with annual taxable sales under 40 million SAR, who will have to file quarterly returns.
Each tax period’s VAT return must be filed between the 1st and the last day of the month following the end of the tax period. For example:
- To file a VAT return for the January to March 2018 quarter, you should file before April 30, 2018.
- To file a VAT return for the month of January 2018, you should file before Feb 28, 2018.
Note: As per the GCC Unified Agreement, timeframes and periods shall be calculated according to the Gregorian calendar and not the Hijri calendar.
Extending deadlines for VAT payment
If a taxpayer is unable to make their VAT payments by the due date, they can request an extension from ZATCA. This request should contain the following details:
The amount of tax owed (tax liability)
The tax period associated with the tax liability
Reason for extension of deadline
ZATCA will approve or reject the extension and apprise the taxpayer within 20 days after the request is submitted.
VAT return form
The VAT return requires taxpayers to provide information about the VAT amount collected on sales and paid on purchases. The form has 16 boxes that cover all transactions. The form is split into two distinct sections. The first section deals with VAT on sales (output VAT) and the second section deals with VAT on purchases (input VAT). The data values in the greyed out boxes will be system generated and automatically calculated based on the input in the other fields.
In addition to these sections, there are three columns that appear on the VAT return form:
Amount
Adjustment
VAT amount
Let’s take a look at the different boxes present in the VAT return form:
Box 1 — Standard rated sales
Amount: This box contains the value of goods and services (subject to the standard rate of 5% VAT) sold in the KSA during the current filing period.
Adjustment: Adjustments made to the sales amount of goods and services sold in the KSA, subject to 5% VAT as reported in previous return forms, should be mentioned here. This includes goods returned by customers and bad debt write-offs.
Box 2 – Private Healthcare/Private Education/First house sales to citizens
Amount: Private sector institutions should enter the value of goods and services supplied to Saudi citizens in this box. The transactions related to non-Saudi recipients which are subject to 5% VAT should be entered in Box 1.
Adjustment: Adjustments made to the sales amount of goods and services supplied to Saudi citizens by the private sector organisations should be mentioned here.
Box 3 — Zero-rated domestic sales
Amount: The value of all goods and services (subject to 0% VAT) sold in the KSA during the current filing period will appear under this box.
Adjustment: Adjustments made to the sales amount of goods and services sold in the KSA, subject to a 0% VAT rate and reported in previous return forms, should be mentioned here.
Box 4 — Exports
Amount: This box contains the value of goods and services (subject to 0% VAT) exported to customers outside GCC countries during the current filing period.
Adjustment: Adjustments made to the sales amount of exported goods and services sold to non-GCC countries, and reported in previous return forms, should be mentioned here.
Box 5 — Exempt sales
Amount: This box contains the value of goods and services exempt from VAT and supplied to customers, either inside or outside the KSA, during the current filing period.
Adjustment: Adjustments made to the sales amount of exempt goods and services sold inside and outside the KSA, and reported in previous return forms, should be mentioned here.
Box 6 — Total Sales
Box 7 — Standard-rated domestic purchases
Amount: Mention the value of goods and services, subject to the standard rate of 5% VAT, purchased from suppliers in the KSA during the current filing period.
Adjustment: Adjustments made to the purchase amount of goods and services from suppliers in the KSA, subject to the standard rate of 5% VAT and reported in previous return forms, should be mentioned here.
Box 8 — Imports subject to VAT paid at customs
Amount: This box contains the value of goods and services purchased from suppliers outside the KSA during the current filing period. These goods and services will be subject to the 5% import VAT, which will be paid at customs.
Goods: Typically, the VAT for these goods should be paid at the time of clearing the goods, but in certain unavoidable cases, there’s an option to pay the VAT while filing returns. The VAT amount paid at customs will be declared here.
Services: For imported services, the taxpayer should account for VAT while filing their return.
Adjustment: Adjustments made to the purchase amount of goods and services purchased from suppliers outside the KSA during the current filing period, and subject to 5% VAT, should be mentioned here.
Box 9 — Imports subject to VAT accounted for through the reverse charge mechanism
Amount: In this box, you should specify details about the total value of imports that were subject to reverse charge. The amount entered in Box 9 is assumed to be eligible for complete recovery.
Adjustment: The amount adjusted as a result of imports that are required to be accounted for under the reverse charge mechanism should be mentioned here. This happens when the customer acts as both- the supplier and the recipient for VAT purposes and self-assesses any amount due.
If there are exempt or non-taxable supplies involved, the corresponding amount should be declared here. The VAT amount entered as adjustment in Box 9 will be calculated and populated under the VAT column which is then paid by the taxpayer.
Example: A bank purchases certain software from a non-GCC vendor for SAR 2000. Since 70% of a bank’s revenue is from VAT exempt services, the bank would be ineligible to claim input VAT for these services.
So the bank would need to split the amount in such a way that 30% of the input VAT is claimed and the remaining 70% is paid to the ZATCA.
In this example, the taxable person should mention SAR 2000 in the Amount column in Box 9 and SAR 1400 (which is 70% of SAR 2000) in the Adjustment column in Box 9. VAT amount will be calculated for the amount entered in the Adjustment column.
This is the split-up for Box 9:
The Amount column will contain the bills and expenses recorded for non-GCC, GCC VAT-registered, and GCC non-VAT registered vendors. It will also contain the vendor credits that are eligible for input VAT recovery.
The Adjustment column will contain the bills, expenses, and the vendor credits that are not eligible for input VAT recovery.
Box 10 — Zero-rated purchases
Amount: The value of goods and services subject to 0% VAT, purchased from suppliers in the KSA during the current filing period, will be mentioned here.
Adjustment: Adjustments made to the purchase amount of goods and services purchased from suppliers in the KSA, subject to a 0% VAT rate and reported in previous return forms, should be mentioned here.
Box 11 — Exempt purchases
Amount: The value of exempt goods and services purchased from suppliers in the KSA during the current filing period should be entered in this box.
Adjustment: Adjustments made to the purchase amount of exempt goods and services, purchased from suppliers in the KSA and reported in previous return forms, should be mentioned here.
Box 12 — Total purchases
Box 13 — Total VAT due for current tax period
Box 14 — Corrections from previous period (less than 5,000 SAR)
Amount: In case of incorrect entries in previous VAT returns, you can make changes here by inputting the correct amount.
Box 15 — VAT credit carried forward from previous period(s)
Amount: Any VAT credits that were earned in previous filing periods, but not claimed or refunded, will be listed here. This amount will be deducted from the total VAT due for the current filing period.
Box 16 — Net VAT due (or reclaimed)
Amount: The total amount of VAT due, or claimed, for the current period should be mentioned here. If you have negative VAT due, you can claim that amount as a refund or carry it forward for subsequent periods.
Note: Adjustments are not applicable for Boxes 14, 15 and 16.
Tax return corrections
If a taxpayer wishes to make changes or rectify an error in a tax return that they have already submitted, they should notify ZATCA of the error by submitting a correction form within 20 days of filing their incorrect return. If the error results in a discrepancy of the tax amount owed (below 5000 SAR), the correction can be made by adjusting the net tax in the taxpayer’s next tax return.