How to register for tax compliance?

Having a brilliant idea to launch your venture in Saudi Arabia can be exciting, but turning it into a real, official business comes with some critical steps. One of the most necessary needs is to register your business for tax compliance. This process might sound burdensome with different rules and strict guidelines, yet it is mandatory. Registering your business with Zakat, tax, and Customs Authority (ZATCA) in KSA involves several steps depending on your ownership structure, your business industry, and scale. It involves legal understanding, complete planning, regulatory approval, and expert guidance. To further simplify the process of tax compliance in Saudi Arabia, we will comprehensively elaborate on it below. Read on to find out.

Key Types of Taxes in Saudi Arabia

The registration steps are crucial, but before that, it is essential to know the different types of taxes enforced in Saudi Arabia.

1. Value Added Tax (VAT): VAT is a tax based on the consumption of goods and services in KSA. It is charged with a fixed rate of 15% and governed by ZATCA
2. Corporate Tax: Corporate tax is charged at a fixed rate of 20%, it applies to only foreign-owned businesses and companies with mixed ownership structures for their foreign ownership portion.
3. Zakat: Zakat is not a traditional tax, but a religious duty which is obligatory in KSA. Zakat is charged at the rate of 2.5% of the zakat base. Zakat applies to the companies with Saudi/GCC ownership and with mixed ownership for their GCC/Saudi percentage.
4. Excise Tax: Goods that are harmful to health are applied with as high as 100% Excise taxes to discourage their use.
5. Withholding Tax: Any payment that is made to a non-resident is required to be reported to ZATCA. This doesn’t necessarily need separate registration other than VAT and CT registration

Saudi Arabia doesn’t impose any personal income tax, making it a favorable destination for many businesses. It also offers exemptions and incentives to keep the businesses motivated to stay legally compliant and imposes heavy fines for non-compliance.

Which Businesses are Applicable to Register?

• Value Added Tax (VAT)

Businesses that have taxable supplies exceeding the worth of SAR 37500 are required to register for VAT. Any business that is expected to exceed this threshold in the coming 12 months must also consider registering to avoid any last-minute hurdle. Apart from that, the non-resident businesses that are making taxable supplies in KSA are also eligible to register from their very first sale, which requires no minimum threshold. Some small businesses also voluntarily register to elevate their credibility and get tax benefits. Their annual supplies must also be between SAR 187,500 and SAR 375,000

• Corporate Income Tax / Zakat Registration

Businesses that are non-residents and conducting services in KSA must register for corporate income tax with the Ministry of Commerce first to get the Commercial Registration certificate. Once CR is issued, they can register with ZATCA for corporate tax compliance. However, businesses that are just subject to Zakat can directly register through the ZATCA portal.

• Excise Tax Registration

Businesses that are involved in the production, import, or distribution of goods that are listed for excise tax, like tobacco, energy drinks, e-smoking devices, etc., must register for Excise tax through the ZATCA platform.

The Step-by-Step Registration Process

Before starting the registration process, it is important to gather all required paperwork, which includes the CR certificate obtained from the Ministry of Commerce, passport copies of owners, financial statements, and bank details. The step-by-step process for tax registration includes:

1. Visit the ZATCA e-portal at zatca.gov.sa and select the e-services
2. Create your account if not activated before, and by using the CR number, obtain your TIN
3. For an individual taxpayer, you must register individually
4. Choose the type of tax you are registering for; it can be VAT, Corporate tax, Excise tax, etc.

1.     VAT Portal Navigation

When you move to VAT registration services, you have to:

• Enter your business details, including CR and TIN
• Input your annual taxable supplies amount
• Add all the necessary supporting documents, and the optional ones
• Include all your details of the local tax representative for non-residents
• Click on submit and wait for the approval.

After the legal verification from ZATCA, you will receive a VAT registration certificate (VAT TRN). The registration date of VAT will be effective from the date mentioned on your certificate.

2.     Corporate Income Tax / Zakat

For the registration of Zakat/corporate tax, you need to go to Zakat/income tax registration under the e-services.

• Complete the registration form by entering all needful data mentioned along with ownership structures.
• Non-GCC residents whose income is generated in KSA will register for corporate tax and offer all the required information, including a copy of the company’s incorporation
• For Saudi entities that are subject to Zakat, the registration process will be done automatically, but will need confirmation and completion of mandatory fields and data required.

3.     Excise Tax Registration

Excise tax is registered separately from VAT and corporate tax and will be selected through the Excise tax registration service from the ZATCA portal. It needs:

• Complete details of the excise goods that your company produces, imports, or distributes in KSA
• Attach all the listed products’ specifications and custom documentation, which is only applicable to import companies.

Ongoing Compliance Requirements in Saudi Arabia

Once you are done with the registration process, you also need to emphasize the ongoing compliance monitoring process, which is done by:

• Accurately and timely filing tax returns within 120 days from the end of the financial year. The income tax due is also paid before the same deadline date to remain compliant.
• Transfer pricing regulations are also crucial for businesses with annual incomes exceeding SAR 48 million; they must file the Disclosure Form of Controlled Transactions (CTDF) to ZATCA along with the other tax returns and maintain complete CTDF documentation
• Although OECD pillar two is not yet applicable in KSA, the multinational enterprises with higher revenues should closely stay updated with the recent changes and keep their documentation ready
• Businesses must utilize all the required elements for mandatory E-invoicing for VAT-registered entities in KSA. This also needs system upgradation and team skills building
• Must keep a clear record for legally sound business operations and to stay protected from penalties; any legal hurdle would not just harm the finances but also business operations and reputation.

Why Register Your Business for Tax Compliance?

Registering your business formally for tax compliance comes with significant advantages and protections, and skipping this step can lead to headaches and legal troubles. Here is why getting your company registered is a smart move:

• Registering the business for tax compliance gives the benefit of legal protection, which means you no longer have to stress over tax troubles or lawsuits.
• A tax-registered business with clarity in tax history is mostly preferred by the stakeholders and customers. Especially the businesses looking for partnerships, shareholders mostly invest their money in legally reliable and reputable businesses.
• Banks and lenders also thoroughly analyze the company’s financial track record and only offer loans to tax-compliant businesses. Hence, registering for tax is highly critical if you are looking for funding.
• Tax registration demands clarity in financial functions. This motivates the companies to stay compliant and keep their financial data transparent, which overall enhances the capital building and business operations

Tax registration is not just legally mandatory but also beneficial for a sound business standing in KSA. Many businesses also register voluntarily to get these advantages. However, it demands expert supervision, understanding of regional taxes, and timely filings. Managing this all with the routine business operations can be demanding. The best approach is to hire the tax and accounting service providers to streamline this process and stay away from compliance pressures

Reach Out to SS&CO Today!

Your business concerns don’t just end with a tax registration; you will need continuous support to navigate the tax and compliance challenges throughout the year. Having the right guidance is important to make sure that you are not paying taxes more than you should, which not only saves the tax liabilities but also lets you invest in other important areas. If tax registration and compliance are not maintained properly, it leads to penalties, strict inspections, and even suspension of licenses, which further stress your capacity. To meet the compliance and tax regulations, hire SSCOKSA, the best accounting firm in Saudi Arabia

Along with our physical support, we also offer online advisory to help you meet your business goals by improving tax outcomes and maintaining complete compliance with ZATCA guidelines. We also analyze and adjust your entity structures, advise you on the best business expansion possibilities, and reassess your ongoing tax planning strategies throughout the year, not just during year end. With a dedicated support team, you have access to unlimited tax consultation from some of the finest tax players in KSA to make certain that you’re always fully covered and supported.