How to submit VAT return in KSA?

VAT is one of the major economic growth pillars, it is consumption-based tax that is applied on each stage of a products journey, from the making to sale. It doesn’t work like income tax which rises with the earnings, but it is equally added to the price of goods and services, ultimately paid by the end consumer. VAT system is used by over 160 countries and KSA is one of them, it was introduced in Saudi Arabia in 2018 and administered by the Zakat, Tax and Customs Authority (ZATCA). VAT has offered a steady and predictable stream of income for the KSA government, regardless of individual earnings.

VAT Return

Since VAT is not that old, it is still a nuanced topic for many traditional firms and non-tax professionals, understanding and complying with VAT laws is necessary because it is applied at each stage and miscalculations may lead to losses. Which is why the requirement of accounting companies is being high on rise in KSA. They not just offer VAT services but help to train the teams to align their business operations according to legal VAT obligations for more precise VAT returns. In this blogpost today, we will talk about how VAT return in KSA is submitted, what are some common mistakes to avoid and optimal actions to improve tax efficiency.

Understanding Value Added Tax in KSA

During the time of VAT establishment in KSA its rate was 5% but later it was increased to 15% due to economic crisis of global pandemic in 2020. Businesses collect VAT on behalf of the government and remit it to ZATCA through periodic VAT returns. The VAT return process includes the details of the VAT charged on sales and paid on purchases through the ZACTA Portal. Businesses are obliged to report their sales, purchases, expenses, output VAT, and input VAT in the format specified by GAZT for VAT filing. Here we will summarize some important considerations to remember for practical VAT compliance in KSA.

• Regardless of your business size, if your annual taxable supplies exceed SAR 375,000 it is mandatory for you to register for VAT.
• Foreign companies conducting business in the Kingdom or government bodies engaging in commercial activities must also register and file VAT returns.
• Startups or SMEs with supplies between SAR 187,500 and SAR 375,000 can voluntarily register for VAT and can obtain VAT incentives and benefits.
• For businesses with annual taxable revenues exceeding SAR 40 million should file VAT returns monthly.
• For Businesses with revenues below SAR 40 million, VAT filing should be done quarterly as per mandated by ZATCA.

VAT return KSA needs to be submitted by the deadline to dodge penalties, stay in good standing with tax authorities, and to keep the finances on track.

Pre-Submission Requirements

For businesses filing their returns for the first time, it is important to understand the VAT requirements to streamline the process with ease. Some important requirements include,

1. Gather all the essential detailed documents like:

• Sales and purchase invoices
• credit and debit notes
• customs documentation for imports and exports
• Records of exempt and zero-rated transactions

To precisely calculate your VAT liability, you must retain these documents for at least the last 6 years.

2. Get advanced accounting software that complies with VAT laws such Zoho Books, SAP, QuickBooks, and Xero. You must also have a professional tax expert or accountant on board or externally hired to simplify VAT registration, filing, tracking and automatically generate the figures required for your return.
3. Before submitting a VAT return, your business must be registered with ZATCA, this can be done by signing up through their online portal to obtain VAT certificate and a Tax Identification Number (TIN).

Beginner’s Guide to Filing VAT Returns in KSA

Filing VAT returns in KSA can be demanding, we will go through a step-by-step methodology to make you clearly grab the process for deeper understanding and hassle-free submission

• Login to ZATCA portal https://zatca.gov.sa through your credentials and navigate to VAT return section. Now click on “VAT Returns” to view the available return periods.
• Carefully select the period for which you need to file a return as per your classified structure, i.e. monthly or quarterly. Once you have selected the period now click on File Return and obtain a VAT Return Form.
• Pay close attention to the form which is divided into various sections such as:

A. Output VAT (Sales)

• Standard-rated domestic sales
• Zero-rated exports
• Exempt sales
• Intra-GCC supplies (if applicable)

B. Input VAT (Purchases)

• Local purchases subject to VAT
• Imports subject to reverse charge mechanism
• Adjustments and corrections for previous periods

C. Net VAT Payable or Refundable

• The system will automatically calculate the total output VAT, input VAT, and the resulting VAT payable or refundable.

4. Examine all the entered information attentively, any error or miscalculation may lead to fines and audits. Hence, make any demanded changes before submission.
5. It’s time to click and submit your return and you will receive a confirmation message with a summary of your return in your account.
6. If you haven’t made the payment, submit it through your preferred and supported methods like SADAD with the reference number provided by ZATCA.

Keeping you with the deadlines is as important as submission. Monthly filers are required to file returns by the last day of the month following the tax period. While quarterly filers should file by the last day of the month following the quarter.

Common VAT Mistakes to Avoid and Associated Penalties

ZATCA put out heavy fines and penalties for businesses that overlook VAT filing process and even small mistakes end up in miscalculations. Some of the fines imposed by ZATCA include:

• Late filing: SAR 1,000 minimum
• Late payment: 5% to 25% of the unpaid VAT
• Filing incorrect returns: Up to 50% of the tax difference
• Failure to register: SAR 10,000
• Improper invoices: SAR 1,000 per violation

These hefty fines can be damaging for a company’s finances and operations. For those reasons, companies must not neglect and double check some of the most common mistakes like:

• Incorrect VAT calculations of input and output figures
• Failure to accurately report taxable and exempt supplies
• Mismatched invoices and financial records documents
• Neglecting credit/debit notes
• Not checking due dates which leads to missed deadlines.

Tips for Efficient VAT Management

For more proactive VAT management and handling it is important to put high emphasis on the following areas:

• Utilize the best VAT compliant accounting software to automate daily routine financial calculations
• Perform internal audits like monthly or quarterly reconciliations to identify discrepancies early.
• Stay updated with the ZATCA regulations to file tax as per the latest guidelines
• Make sure your finance teams are well trained in VAT principles and filing procedures.
• Hire professional tax advisor through local accounting companies especially if dealing with cross-border transactions or sector-specific exemptions.

How SS&CO Accounting Firm help in VAT Return Filing

SSCOKSA is one of the top most accounting companies operating in KSA. We play a pivotal role in helping businesses manage and file their VAT (Value Added Tax) returns accurately and on time. Here’s how we assist:

1. Guide you through the entire process of VAT registration and make certain that you fully comply with tax laws
2. Keep an accurate financial record so that your all-taxable figures are documented precisely
3. Submit VAT returns before deadlines through authorized portals and advanced software
4. Offer audit support by representing in front of tax authorities and respond to queries from tax officials.
5. Provide high level VAT training to staff and keep them updated about the recent changes and VAT rates.

With our team of skilled tax professionals, you can have the most proficient VAT services, that will not just help you stay complaint but will provide you clarity and peace of mind so you can stay focused on your operational success.