What is the difference between Gazt and ZATCA?

The Saudi Financial Landscape has rapidly revolutionized in the last couple of years, with changes in regulations, legal requirements, and latest guidelines. ZATCA is also one of the major initiatives behind this transformation. What was once GAZT was reconstructed into ZATCA to cover Zakat, tax, and customs all under one unified platform. GAZT was mainly responsible for looking after Zakat and tax; however, ZATCA was created by merging GAZT and the General Authority of Customs. This evolution reshaped the old practices, enforcement of compliance, and the interaction of taxpayers with the state. It did not just elevate efficiency, boost the collection of revenues, and modernize digital services, but also supported the goals of Vision 2030. This blog tells a story of GAZT and ZATCA, including a brief history, the key duties of each body, why this merger was necessary, and practical guidelines for taxpayers and advisors.

Understanding the General Authority of Zakat and Tax (GAZT) and The General Authority of Customs

Structuring and organizing Zakat and taxes in KSA dates back many decades; in the beginning, it was looked after by the Ministry of Finance. Over time, as the practices evolved, functions were formalized into dedicated institutes for each operation. This is when the General Authority of Zakat and Tax (GAZT) started to look after Zakat and direct and indirect taxes. GAZT’s role was beyond the traditional services; it introduced modern financial practices, including tools and guidelines for VAT, corporate tax, Zakat, and withholding taxes. On the contrary, the customs duties were initially looked after by the General Authority of Customs, also known as Saudi Customs. This entity established strict controls, collection of customs duties, classification of tariffs, and other wide enforcement functions to guard the domestic markets and to collect customs revenues correctly. Customs also played a critical part in the integration of trade policies and the cross-border movement of goods.

The Creation of Zakat, Tax, and Custom Authority (ZATCA)

In 2021, the Saudi Cabinet decided to merge the GAZT and the General Authority of Customs to build a single consolidated body to look after the duties of both entities. This body was named The Zakat, Tax and Custom Authority (ZATCA). This merger was done by the Council of Ministers and published in the middle of 2021 to implement the regulations of zakat, tax, and customs under a single umbrella. This new body was given full authority to not just collect zakat, taxes, and customs duties but also to implement the latest digital solutions and revamp the legal guidelines as per international best practices.

It reorganized the major duties and framework of the targeted agencies and placed the new authority under the Minister of Finance. Not just the arrangements like staffing, powers, and regulations were changed, but also the statutory frameworks had evolved. The main vision behind this was to enhance performance, professionalism, and contribute to the national economic strategy.

The Mandate and Functions of GAZT

The key responsibilities of GAZT carried before the merger were not just limited tasks, but substantial responsibilities as well. Which included,

1. Zakat Collection and Administration: GAZT implemented regulations and rules for the zakat on commercial bodies, which included the corporate tax base, classification of assets, and mechanisms for the collection and assessment of Zakat. It also provided instructions on the eligibility criteria.
2. Tax Assessment and Collection: For direct and indirect taxes, it was the main authority that integrated the Value Added Tax (VAT), corporate income tax for foreign entities, and withholding taxes, their registration, returns, and assessments
3. Policy Implementation and Taxpayer Services: GAZT provided regulations, public guidance, and rulings, along with registration of taxpayers, and conducted audits.
4. Digital Transformation: before ZATCA, GAZT also worked on investing in digital tools like electronic filing, e-invoicing pilots, etc. The project later became the backbone of e-invoicing and custom digitization.

GAZT is still widely known since it was a one-stop for tax and zakat obligations, with structures registration, filing, and assessment procedures.

The Goal Behind the Merger and Creation of ZATCA

The merger that resulted in the formation of ZATCA was not just to restructure the tax reforms but also to respond to several policies. Which included,

1. Institutional Integration for Efficiency: Merging of tax, zakat, and customs reduced the duplication of law enforcement and interaction between the taxpayer/trader and authorities. Under one platform, authorities were able to prioritize risk analytics, taxpayer databases, and compliance requirements, and it also reduced the simplified trade and tax obligations for businesses.
2. Digital Evolution and Single Customer Experience: As KSA is highly emphasizing digitalization, ZATCA allowed them to use integrated digital platforms such as e-invoicing tools, e-portals for taxpayers, and customs single-window. This resulted in better fillings with automated processes that were not prone to manual labor errors. Fatoora is one of the pivotal examples of integrated digital compliance.
3. Better Compliance and Risk Management: Oftentimes, authorities overlap the important guidelines like trade flows, value of imports, and invoicing. With a single authority, they were able to correlate both customs declarations along with invoices and filing for returns, which also strengthened the security protocols and proactive detection of any underreporting or fraud.
4. Economic Competitiveness and Trade Facilitation: This merger helps the country to position itself as a global player by implementing global best practices. This also attracted global investments to diversify the economy. The rules were better and clearer with prompt clearances and more consistent enforcement.

Key Duties of ZATCA After the Merger

After merging GAZT and Saudi Customs, ZATCA was created, which took care of the combined duties of both with added rules. Its core responsibilities included,

1. Collection of Zakat and Stewardship: It continued the role of GAZT and now, with ZATCA’s supervision, with Stricker rules for accurate calculations and distribution of it as per Sharia and statutory rules.
2. Tax Administration and Stewardship: ZATCA collected the corporate tax, VAT, excise, and withholding taxes with a complete process of registration, e-services, audits, rules, and enforcement. ZATCA is also maintaining and offering the latest changes in portals, filing systems, and compliance programs
3. Custom Administration: ZATCA implemented better controls, facilitated trade services, collection of tariffs, classification of cargo, and anti-smuggling protocols. Above all, the customs and tax functions were able to elevate the risk management and speed up the transaction procedures.
4. Digital Transformation: ZATCA worked on revamping the digital practices with e-invoicing, electronic declarations, and interfacing with ports, shipping lines, and logistics providers for a better and paperless trade system. This modernized approach of ZATCA integrated and advanced the legal policies of tax and customs in KSA.

Businesses today work under the same authority for cross-border transactions, domestic tax matters, and customs duties, which makes compliance an easier process.

Practical Differences for Businesses and Traders

Most of the services of GAZT and ZATCA remained the same even after the merger, yet there were several key differences specifically for businesses and traders, which mainly included,

1. Single Point of Contact: Many companies that used to interact with GAZT for tax returns and used to pay customs duties separately were now interacting with ZATCA for both, using a single portal. This not only streamlined the registration but also minimized the burden of filings
2. Stronger Cross-checking of Data: Since now one platform was handling customs and taxes, traders were expected to get better cross-matching and prompt detection of any faults, mishandling, and fraud in invoices. This made it mandatory for businesses to implement the correct invoice practices.
3. Accelerated E-invoicing and Digital Compliance Management: Under ZATCA, not just the regulations evolved, but the need to adopt digital systems was also mandated. The Fatoora E-invoicing made it crucial for businesses to adapt ERP/POS solutions to meet the needs of electronic reporting, and non-compliance exposed the companies to heavy fines and penalties.
4. Refined Dispute Resolution and Ruling: With merged jurisdictions and regulations, businesses were able to follow integrated procedures, yet there are still some dispute routes that vary depending on the legal instrument governing a particular levy.

Which legal and Zakat obligations remained the same?

Although the merger restricted every regulation, it did not actually change the laws on Zakat and statutory taxes all of a sudden. The tax laws, custom legislations, and zakat provisions were the same and governed by the statutes and royal decrees that created them. What changed was the supervising body, which was now ZATCA from GAZT, and the technological tools that were used to ease the compliance protocols.

SS&CO, Your Partner in ZATCA Compliance

At SSCOKSA, we believe that staying compliant with ZATCA shouldn’t be demanding; it should be easy to keep you always compliant and ahead in the market by gaining the confidence of investors and clients. That’s why we facilitate our clients with,

• Smart Zakat and Tax solution covering VAT, Zakat, corporate tax, and withholding tax with right filings.
• We make your customs effortless with a smooth clearance process, paying the correct duties, and zero surprises
• Get ready for audits from ZATCA with the confidence of our experts standing by your side
• On-demand training sessions and workshops to keep the internal teams and operations always aligned with ZATCA guidelines.

Get in touch with us today and let us make your compliance a stepping stone, not a stumbling block!