20 November 2023

josleen deeb

In the ever-evolving realm of fiscal policies, Saudi Arabia is gearing up for groundbreaking changes with the proposed New Tax Law and amendments to the Zakat and Tax Procedures Law. At the forefront of this transformation, we navigate through the intricacies of these proposals, shedding light on what businesses and individuals need to know. 

Riyadh: The proposed New Tax Law marks a pivotal shift in Saudi Arabia's taxation paradigm. From redefined tax categories to nuanced adjustments in tax rates, this legislation sets the stage for a comprehensive fiscal overhaul. Businesses and individuals must brace themselves for a recalibrated tax landscape.

I. Unpacking the Zakat and Tax Procedures Law

A closer look at the proposed amendments to the Zakat and Tax Procedures Law reveals a meticulous effort to streamline existing processes. Delving into the intricate details, we explore the implications of these changes on businesses and individuals, comparing them against the current regulatory framework. The government vision is a catalyst of change. 

The Proposed New Tax Law and Zakat and Tax Procedures Law bring significant advancements to the tax system, with key updates outlined below:

  • Introduction of New Definitions: The tax law now includes new definitions such as Preferential Tax Regime, Corresponding Adjustments, Hybrid Instruments, and more.

  • Unified WHT Rate for Services: The withholding tax (WHT) rate for services is streamlined to a flat 10%, ensuring simplicity and consistency.

  • Clarity on Tax Exemption for Employment Income: The proposed new tax law explicitly states that there is no tax on income from employment for natural persons.

  • Reduction in Statute of Limitations: The statute of limitation period is reduced from 5 years to 3 years, enhancing efficiency in tax-related matters.

  • Penalties for Delayed Zakat Payments: A penalty is introduced for delays in paying due Zakat for the first time, emphasizing the importance of timely compliance.

  • Additional Penalty for ZATCA Amendments: In case of amendments made by ZATCA, an extra penalty is imposed on top of the delay penalty, reinforcing the significance of adherence to regulations.

  • Increased Penalty for Tax and Zakat Evasion: The penalty for tax and Zakat evasion sees an increase, ranging from 100% to 300% of the due Zakat or Tax. This underscores the severity of non-compliance.

These updates signify a comprehensive restructuring of the tax framework, promoting clarity, efficiency, and strict adherence to regulations. It is essential for businesses and individuals to stay informed and adapt to these changes for seamless compliance.

II. Key highlights of the amended law

The proposed Zakat and Tax Procedures Law introduces key provisions that reshape the landscape of tax procedures. Noteworthy among these provisions are:

1. ZATCA's Assessment Authority: ZATCA holds the authority to issue assessments on a deemed basis if the return is not filed within the statutory period. However, this issuance should not occur before 60 days from the statutory filing date, with exceptions defined by the by-law.

2. Limitation on Assessment Period: ZATCA is restricted from carrying out assessments for Zakat or Tax periods after three (3) years from the end of the calendar year in which the statutory filing period expired. This period may extend to ten (10) years in specific cases, including failure to file the return, acts of Tax evasion, or written agreement by the taxpayer.

3. Fines for Non-Payment and Unlawful Refund: Non-payment (totally or partially) of Due Zakat or Tax within the prescribed period, along with unlawful refund, incurs fines, including:

  • A fine of two percent (2%) of the unpaid or unlawfully refunded Zakat or Tax for each month or part thereof, not exceeding fifty percent (50%) of the unpaid amount. The fine starts from the day following the period specified by regulations for payment.

  • An additional fine of one percent (1%) for every month or part thereof if Due Zakat or Tax is amended by ZATCA after 30 days from the amendment notification.

4. Penalty for Evasion: The penalty for engaging in or aiding tax evasion ranges from one hundred percent (100%) to three hundred percent (300%) of the due Zakat or Tax. This underscores the severity of involvement in any act of evasion.

5. Transfer Pricing Considerations: The law hints at the importance of transfer pricing, suggesting a need for businesses to carefully evaluate and document their intercompany transactions to align with regulations and avoid potential penalties.

These provisions underscore the stringent measures in place to ensure timely compliance, discourage evasion, and maintain the integrity of the tax system. Businesses and taxpayers must be well-versed in these regulations to navigate the evolving tax landscape effectively. 

Zakat and Tax Procedures Law Impacts

  • Impact on Businesses: Winning over challenges
As the proposed laws ripple through the business sector, companies face a landscape of new challenges and opportunities. Strategic insights for proactive adaptation must be sought by businesses. 

  • Impact on Individuals: Shaping Personal Finance
Individuals, too, are not exempt from the sweeping changes. This segment articulates the adjustments individuals must make to align with the proposed tax alterations. From modified tax obligations to potential shifts in personal financial strategies, clarity is provided for navigating the new fiscal terrain.

  • Public Discourse: Voices and Perspectives
Public opinion plays a crucial role in shaping the acceptance of these changes. We delve into the ongoing public discourse, capturing sentiments, debates, and discussions surrounding the proposed tax laws. Identifying challenges is only half the battle. Addressing concerns head-on is vital for the seamless implementation of the proposed tax laws.

Implementation Roadmap: Phased and Pragmatic
A detailed timeline of implementation is critical for preparedness as the implementation of the Roadmap is challenging whereby amidst uncertainty, strategic navigation is paramount for individuals and businesses is needed. A pragmatic guidance emphasizing consultation avenues and support available structures is necessary.

In Conclusion

Speculating on future amendments and adjustments, this section paints a picture of the evolving fiscal landscape in Saudi Arabia. Anticipated changes and potential shifts provide a glimpse into the nation's fiscal future.

The proposed tax laws in Saudi Arabia usher in a new era of fiscal responsibility. From businesses adapting their models to individuals recalibrating their financial strategies, the changes are profound. This article serves as a beacon through uncharted waters, ensuring businesses and individuals are well-prepared for the impending fiscal transformation.

We highly recommend Tax and Zakat payers to provide their feedback regarding the new proposed amendments by accessing the Government of Saudi Arabia “Istitlaa portal”


Our team has excelled in providing accurate advice and supported individuals and businesses in the UAE and in the GCC to go through the legal reforms as imposed by the legislators. Should you believe that you need any clarifications and you have a business expanding to Saudi Arabia, we will happy to assist, let us know. 

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