Understanding ZATCA’s Guide on Cancellation of Fines and Exemption of Financial Penalties

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The Zakat, Tax, and Customs Authority (ZATCA) has issued a new guide or a resolution to help taxpayers understand the latest rules for fines, exemptions, and penalties, effective from July 1, 2024. The resolution will remain effective for six months, from July 1, 2024, to December 31, 2024 (Initiative Period).

This guide aims to ease the financial burden caused by the COVID-19 pandemic by providing clear instructions on how to benefit from these exemptions while ensuring compliance with tax laws and regulations.

Key Features

Key highlights of the resolution include exemptions from financial fines for late registration, late return submission, and late tax payment across all tax laws. Specifically, it exempts fines for corrections in VAT returns and VAT field violations, viz. 

• failure to issue and maintain tax invoices or e-invoices, debit notes or credit notes
• failure to maintain invoices, accounting records and documents; 
• incorrect tax calculations etc. 

The initiative covers various types of taxes, including Value Added Tax (VAT), Real Estate Transaction Tax (RETT), Withholding Tax, Excise Tax, and Income Tax. However, it excludes fines paid before June 1, 2022, and fines resulting from tax evasion violations.

To benefit from the initiative, taxpayers must be registered with ZATCA and have submitted all required returns. They must also correctly declare all unpaid taxes and pay all principal tax debts. For VAT return filing fines, all required returns must be submitted, and the total principal tax debt must be paid. Likewise, for e-invoicing violations, taxpayers must submit all required returns and comply with e-invoicing requirements.

The guide provides examples to illustrate how taxpayers can benefit. For instance, Saad, who sells fragrances, can benefit by submitting overdue VAT returns and paying due taxes within the specified period. An establishment operating in KSA can benefit by disclosing and paying due withholding taxes within the initiative period. 

Tax Payment in Installments

If taxpayers are unable to pay the full tax debt immediately, they can apply for an installment plan during the Initiative Period. Any late payment fines resulting from tax payment as per the approved installment plan will be exempted even if tax is paid after the Initiative Period. 

The installment plan process involves submitting a request during the Initiative Period. ZATCA will review and approve these requests, ensuring that the taxpayer is qualified. Payments will then be scheduled according to the specific periods outlined in the approved plan. It is important for taxpayers to comply with the installment plan to avoid fines for unpaid amounts. 

Conclusion 

This initiative offers a valuable opportunity for taxpayers to rectify their status, comply with tax regulations, and benefit from exemptions on fines and penalties. It encourages timely tax compliance and provides flexibility through installment plans, aiding in mitigating financial impacts from the COVID-19 pandemic. Taxpayers should consult their advisors and take advantage of this initiative from July 1, 2024, to December 31, 2024. 

Disclaimer: Content posted is for informational and knowledge sharing purposes only, and is not intended to be a substitute for professional advice related to tax, finance or accounting. The view/interpretation of the publisher is based on the available Law, guidelines and information. Each reader should take due professional care before you act after reading the contents of that article/post. No warranty whatsoever is made that any of the articles are accurate and is not intended to provide, and should not be relied on for tax or accounting advice.