A tax return is the form in which a company tells the Authority its figures: what it sold, what it bought and what it earned. The tax or zakat due is worked out from those figures.
Many people think the only thing that matters is filing the return before the deadline. But the Zakat, Tax and Customs Authority asks two separate questions: was it filed on time? and are its figures correct? A penalty can follow either one, even if the company got the other right.
In this article we explain when a company files its returns, what penalties the Authority has published, what it means for a return to be "sound", and what to do if you find a mistake after filing.
When does a company file its returns?
| Return | What it is | Deadline |
|---|---|---|
| VAT | An indirect tax on goods and services, imported or supplied, collected at each stage of production and distribution and borne in the end by the consumer | Every month if the company's revenue is above SAR 40 million, otherwise every 3 months. Due by the last day of the month after the period ends |
| Withholding tax | Tax taken from amounts you pay to a party outside the Kingdom | The 10th of the month after the month of payment |
| Annual return (zakat or income tax) | The accounts for the whole year | Within 120 days of the year-end. For a year ending 31 December, that is roughly the end of April |
In every case you need to file and pay together by the deadline. Filing a return without paying the tax due is not full compliance, as we will see under the penalties.
What does it mean for a return to be "sound"?
Four things, and none of them replaces the others:
- Figures taken from the company's actual books. Not from estimates or memory. The Authority requires establishments subject to income tax to keep their books and accounts in Arabic.
- Each transaction in its correct box. Is a sale subject to VAT or exempt from it? Is an amount paid to a party outside the Kingdom a consulting fee or a royalty? A mistake here changes the tax. We covered two cases in separate articles: VAT and imported services and withholding tax and double tax treaties.
- A document behind every figure. A company can only recover the VAT it paid on its purchases with a valid tax invoice or a customs document.
- Filing and payment on time.
The penalties the Authority has published
VAT:
- Filing the return late: 5% to 25% of the tax that should have been declared.
- Paying the tax late: 5% of the tax due for each month of delay, even if the month is not complete.
- An incorrect return that makes the calculated tax lower than the tax actually due: 25% of the difference, which the Authority may raise to 50%.
- Failing to register for VAT within the specified period: SAR 10,000.
- Collecting the tax from customers without being registered, including issuing a tax invoice while unregistered: up to SAR 100,000.
- Not keeping invoices, books, records and accounting documents: up to SAR 50,000.
- Preventing the Authority's staff from doing their work: up to SAR 50,000.
- Violating any other provision of the VAT law or its implementing regulations: up to SAR 50,000.
- Submitting incorrect documents to evade tax, or moving goods into or out of the Kingdom without paying the tax: not less than the tax due and not more than three times the value of the goods or services.
- Repeating the violation within 3 years of the final decision on it: the Authority may double the penalty.
Income tax:
- Filing the return late, after 120 days from the year-end: the Authority calculates the penalty in two ways and takes the higher. The first is 1% of the company's total revenue, up to SAR 20,000. The second is a percentage of the unpaid tax that rises with the delay: 5% if the delay does not exceed 30 days, 10% if it exceeds 30 days, 20% if it exceeds 90 days, and 25% if it exceeds a year.
- Also treated as failing to file: not using the approved form, and not paying the tax due within the filing period.
- Paying the tax late: 1% of the unpaid tax for every 30 days.
- False information or fraud with intent to evade tax: 25% of the tax difference.
- Failing to register within the statutory period: SAR 1,000 for a natural person, SAR 10,000 for a joint-stock company, SAR 5,000 for other entities.
Withholding tax: 1% of the unpaid tax for every 30 days of delay.
An honest mistake versus fraud
The Authority distinguishes between a mistake and fraud. If the taxpayer or their certified accountant gives false information with the intent to evade tax, the Authority applies, in income tax, 25% of the tax difference. The forms of fraud include books that do not reflect the company's real position, forged or altered invoices to reduce profit, hiding a taxable activity, and destroying books before an audit.
An honest mistake is not fraud, but it still carries a penalty. Good faith matters, but it does not replace correct figures.
Common mistakes
- Filing the return before checking its figures against the books and documents.
- Recovering VAT on purchases without a valid tax invoice, or on purchases unrelated to the business such as entertainment and cars.
- Forgetting to account for VAT on services you buy from a party outside the Kingdom.
- Withholding one flat rate from every payment abroad, without identifying the type of payment or considering the double tax treaty.
- Issuing credit or debit notes late. These are documents that correct an invoice up or down, and they are due within 15 days after the end of the month in which the reason for them arose.
- Revenue figures that differ between one return and another with no explanation. The Authority receives all your returns, so keep a written explanation for any difference.
- Leaving a discovered mistake uncorrected until "next period".
If you find a mistake after filing
Do not wait for the Authority to find it. The route depends on the size of the mistake, and this is for VAT.
If the shortfall in tax is less than SAR 15,000 (the limit set by Article 63 of the Implementing Regulations): you correct it in the return for the period in which you found the mistake, not by amending the old return. The return has a box called "Corrections", where you add the missing amount to the tax due. One of the Authority's examples in its guide to the amendments to the Implementing Regulations: a company filed its first-quarter return, then found that the tax in it was SAR 10,000 short. It adds the SAR 10,000 in the "Corrections" box of the return for the period in which it found the mistake.
If the shortfall is SAR 15,000 or more: the route is different and requires notifying the Authority, so take advice before correcting.
If the tax you declared was more than necessary: you correct it by adjusting the amount in a later return, within the period the regulations set.
Returns other than VAT have their own correction routes. Take advice before choosing the route, because choosing the wrong one may add a new violation.
Should we rely on the penalty cancellation initiative?
The Authority announced an initiative to cancel penalties and exempt financial sanctions, and extended it to 31 December 2026. But it covers only returns that fell due up to 30 June 2026, and it does not cover anything after that date, nor evasion violations. It requires the company to be registered with the Authority, to file all its due returns, and to pay the tax or apply for an instalment plan.
So it eases the effect of the past; it is not something to build your future plan on.
A checklist before you press "Submit"
- Do you have a schedule of return deadlines, with someone responsible for it?
- Has the period been closed, and do its figures agree with bank statements and documents?
- Has every sale, and every payment to a party outside the Kingdom, been given its correct classification?
- Does every VAT amount you recover have a tax invoice or a customs document?
- Has someone other than the preparer reviewed the return?
- Is payment prepared for the same date as filing?
- Are the return and its documents kept in one file that is easy to produce?
This article is for general information and is not professional advice on any specific situation. The deadlines and penalties above follow what the Zakat, Tax and Customs Authority has published in its guides and announcements, and were reviewed on 12 October 2026; they may change after that date, and temporary initiatives especially so. If you need a return reviewed before it is filed, you are welcome to contact us.