Deferred filing and payment deadlines and a suspension of VAT penalties
Saudi Arabia has introduced a range of measures and incentives to help businesses during the COVID-19 crisis. The main measure applying to VAT is a three-month deferment of filing and payment deadlines. This deferment applies to all VAT periods ending between 28 February 2020 and 30 May 2020. In addition, the deadlines for the excise tax return for the period from 1 March 2020 to 30 April 2020 will be extended to 15 August 2020.
Full details of the Saudi measures, including the measures applying to direct tax and zakat, can be found in BDO’s Global support tool.
VAT penalties suspended
In addition to the deferment of deadlines, the General Authority for Zakat and Tax has announced that no penalties will be levied on taxpayers that make corrections to previous VAT returns, or submit late VAT returns, between 18 March 2020 and 30 June 2020, provided the tax is paid by 30 June 2020.
Penalties for errors and for the late payments of VAT are high in Saudi Arabia. The temporary waiving of penalties is therefore a major incentive for taxpayers to deal with any errors they have identified but have not yet corrected and to make sure returns and payments are up to date.
The correction of a VAT return normally attracts a penalty of 50% of the tax concerned plus a delayed payment penalty of 5% of the tax payable, per month. The penalty for the late filing of a VAT return is normally between 5% and 25% of the VAT due and in addition, the 5% delay penalty will also be charged.
Taxpayers should take this opportunity to review their VAT accounting to ensure that everything is up to date and that there are no issues that require correction. If any errors are discovered, they should be corrected, and the VAT should be paid, within the suspension period.