What is ZATCA in Saudi Arabia?

The Zakat, tax, and Customs Authority (ZATCA) is one of the major pillars behind the KSA’s economic advancement. ZATCA KSA was created from the consolidation of the General Authority of Zakat and Tax with the General Customs Authority, which shows a gradual shift towards unity, efficiency, and progress. ZATCA guards resources, ensures compliance, and opens new doors for trade opportunities. It manages Zakat, Taxes, and Customs all under a single unified platform that drives transparency, accountability, and ease of operating a successful business.

The role of ZATCA KSA is not just bound to gathering dues, but about building a future with a vision to become a globally competitive economic governance. The mission of ZATCA is simple yet powerful to boost the Saudi’s economic prosperity, balance security with the facilitation of trade, and build systems that are sustainable in the long term. This blog will shed light on the ZATCA functions, responsibilities, services, and its importance within the Saudi Arabian Economy.

Background and Establishment of ZATCA KSA

ZATCA is a short form of Zakat, Tax, and Custom Authority. It is a government entity that is fully responsible for the collection of Zakat, taxes, and customs duties in KSA. ZATCA was founded 2021 by the combination of the General Authority of Zakat and Tax (GAZT) with the Saudi Customs Authority. It joined in government endeavors to elevate proficiency, ease processes, and facilitate business operations in the Kingdom.

Prior to ZATCA, GAZT mainly looked after the Zakat and Tax services, while the Saudi Customs Authority managed border control, customs duties, and international trade facilitation. By incorporating these two entities under one platform, the government’s goal was to build an authority that is skilled and suited to tackle all the areas of revenue collection and trade regulations more proficiently.

Key Responsibilities of ZATCA

ZATCA KSA takes hold of a wide range of services that cover multiple core sectors of the Saudi Economy. Its responsibilities are mainly divided into four major areas:

1.     Zakat Administration

ZATCA oversees the collection of Zakat from businesses and applicable entities in KSA. Zakat is one of the five pillars of Islam, which makes it not just an economic duty but a religious obligation for Muslims. It is strictly mandated by the Saudi government, and ZATCA makes certain that all entities pay a fair part of their Zakat in line with Islamic principles. This Zakat is later distributed among the needy, poor, and for social welfare programs by ZATCA as well.

2.     Taxation

ZATCA also looks after the taxation system in KSA, which includes the eligible taxes such as:

• Value Added Tax (VAT): It was introduced in 2018 to support the goals of diversification of the economy.
• Corporate Income Tax: It is only applied to foreign businesses operating in the KSA
• Excise Tax: This tax is charged on certain goods that are hazardous to health, like tobacco, soft drinks, and energy drinks.
• Withholding Tax: levied on certain payments that are made across borders.
• Real Estate Transaction Tax (RETT): It replaced the 5% VAT on real estate transactions.

ZATCA KSA makes sure that every business operating in the Kingdom is fully compliant; in case of any non-compliance, it imposes heavy fines and conducts tax audits.

3.     Customs Duties and Border Management

ZATCA also takes care of the operations related to customs, which include the collection of customs duties on the goods that are imported, elevation of security to prevent any case of smuggling, facilitation of trade to make sure that goods are distributed smoothly across borders, and implementation of the international customs agreements and standards.

4.     Digital Transformation and E-invoicing

ZATCA plays the leading role in revamping the country digitally in revenue collection. One of the core digital initiatives of ZATCA was e-invoicing (FATOORA), which demands the businesses to produce and store all invoices digitally. This initiative not just amplifies the transparency and deals with tax evasion but also intensifies compliance.

Major Initiatives and Programs by ZATCA

ZATCA KSA has initiated several programs to support Saudi Arabia’s Vision 2030 goals and to foster the Kingdom’s financial and trade infrastructure. Some of the key initiatives include:

1.     E-Invoicing (FATOORA)

E-invoicing by ZATCA has reshaped the way businesses operate in Saudi Arabia. It ensures that all business-to-business, business-to-consumer, and business-to-government transactions are fully documented digitally to mitigate fraud and lift up proficiency.

2.     Digital Customs Transformation

ZATCA is simplifying the routine procedures through the digital systems, which makes import and export procedures faster, systematic, secure, and less open to corruption

3.     Trade Facilitation Agreements

ZATCA keeps the Saudi Goals in line with the global trade standards through its customs guidelines. This attracts foreign investors and encourages international businesses to trade with Saudi Arabia.

4.     Voluntary Disclosure Programs

To uplift compliance and to motivate businesses to pay taxes, ZATCA has also launched several programs where businesses can reveal their unpaid taxes voluntarily or Zakat without the fear of facing several penalties or legal hurdles.

5.     Integration with International Tax and Customs Standards

ZATCA set up compliance with internationally recognized standards, such as the Common Reporting Standard (CRS) and the World Customs Organization (WCO) guidelines. These standards keep the Kingdom lined up with international markets and make it competitive enough to raise the standard to a global level.

How ZATCA Fueled Digital Transformation in KSA

As we have discussed above, ZATCA KSA is working progressively towards the digital evolution in KSA. It has re-evaluated the way Kingdom controls financial governance, compliance, and trade through an assembled digital system.

1.     E-Invoicing Implementation

One of the innovative steps was the implementation of e-invoicing, which increased transparency and automated business operations with paper-free solutions. It also assists businesses build better bonds among businesses, consumers, and regulators.

2.     Digital Customs and Trade Facilitation

ZATCA has evolved the way goods enter and leave the Kingdom through the automated customs process. These smart clearance systems benefit traders as they can get prompt approvals, better risk management, and integrated sharing of data.

3.     AI and Data-Driven Decision Making

By utilizing artificial intelligence, blockchain technology, and smart analytics, ZATCA has moved from reactive enforcement to predictive insights. With real-time monitoring, detection of fraud, monitoring compliance, and prediction of revenues has become an easy process. This also enables authorities to work under safe national security and revenue.

4.     Enhancing the Customer Experience

ZATCA’s digital platforms help customers with easy filing, payments, and tracking. This shows their customer-centric approach, which replaces bureaucratic bottlenecks with intelligent digital solutions that save time and boost compliance rates.

5.     Strengthening Saudi Arabia’s Global Competitiveness

By integrating the technology in every area of tax, zakat, and customs, ZATCA has not just modernized the processes but also revolutionized Saudi Arabia into a global digital economy. International investors today rely on the Saudi Markets as a technologically advanced and economically reliable country to put their money in.

How ZATCA Supports Businesses

Along with supporting the Saudi economy, ZATCA also favors businesses through offering several programs and reliefs. This not only keeps them committed to paying their taxes on time but also eases the process for traditional businesses. Some of their offerings include:

• ZATCA offers detailed guidelines and online platforms for businesses where they can effortlessly register for tax and zakat, file their returns, and keep track of their payment status.
• The Auditing system of ZATCA convinces businesses to be fully compliant with zakat and tax. In case of any misdirect, it performs inspections and audits to verify financial statements and reports.
• ZATCA further offers training programs to businesses on matters that are related to tax, including how they can take care of VAT, income tax filing, and Zakat without any hassle. Their customer support also provides round-the-clock assistance through e-portals or even in person.
• The VAT Refund Program of ZATCA allows businesses to claim their refunds for the tax paid on certain items, which aids in refining the cash flow

The Future of ZATCA

If we look towards the future, ZATCA is expected to continue promoting economic and digital advancement in the Kingdom. Some of the anticipated changes and future plans include:

• Expanded integration of the E-invoicing system with the regional and international systems
• Deployment of innovative technologies like AI and Big Data to surge compliance and fraud detection
• Building programs that help to collaborate with businesses, making compliance easier for specifically Startups and SMEs
• Toughening the controls to safeguard the country further from smuggling and ensure the safety of goods.

How SS&CO Supports ZATCA Compliance

SSCOKSA is one of the leading accounting firms operating in KSA. With the know-how of every legal guideline offered by ZATCA KSA and staying updated with any forthcoming ZATCA changes, we promise business compliance, efficiency, and protection. With our auditing, accounting, and tax advisory services, we cover every aspect of ZATCA KSA compliance. Our team bridges the gap between regulation and business operation and makes it as seamless as possible to keep you always less worried about legal matters. We incorporate with ZATCA, and together we contribute to building a sustainable, transparent, progressive, and development-focused business in Saudi Arabia.