The
English version of this document is for guidance only.
The Arabic version is the governing text.
Chapter
Eleven:
General
Provisions
Article
56 : Tax Administration
The
Department is the body responsible for the administration,
examination, assessment, and collection of income tax.
Article
57 : Taxpayers' Registration
(a)
Every person subject to tax in accordance with this Law shall
register with the Department before the end of its first fiscal
year.
(b)
The provisions of this Article do not apply to taxpayers subject
only to final withholding tax in accordance with Article 68
of this Law.
(c)
A fine not less than one thousand riyals (SR 1,000) and not
exceeding ten thousand riyals (SR 10,000) shall be imposed
for failure to register. The Regulations shall specify the
restrictions and amount of fine on different categories of
taxpayers.
Article
58 : Books and Records
(a)
A taxpayer, other than a non-resident with no permanent establishment
in the Kingdom, shall maintain in Arabic the necessary commercial
books and accounting records for precise determination of
the tax payable by it.
(b)
The Department has the right not to allow a deduction if the
taxpayer is unable without reasonable excuse to produce a
document of the expense or evidence supporting the legitimacy
of its claim for the deduction.
Article
59 : Confidentiality
of Information
(a)
The Department and all its staff shall maintain confidentiality
of information pertaining to taxpayers which they have access
to in their official capacity. As an exception, they may disclose
information only to the following bodies:
- employees
of the Department in the course, for the purpose, of carrying
out their duties under the law;
- employees
of the Customs Authority, for the purpose of enforcing the
Customs Law;
- the
General Audit Bureau, in its official capacity, for the
purpose of auditing and reviewing;
- the
tax authorities of foreign countries in accordance with
treaties to which the Kingdom is a party;
- law
enforcement agencies, for the purpose of the prosecution
of tax offenses;
- any
judicial body in the Kingdom, upon its order, in a case
under review, to determine a taxpayer's tax liability, or
in any other administrative or criminal matter under review.
(b)
A person receiving information under paragraph (a) of this
Article shall be required to maintain its confidentiality,
and not to use it except for the purpose for which it is required.
(c)
Information concerning a taxpayer may be disclosed to another
person with the taxpayer's written consent.
Chapter
Twelve:
Filing
of declarations, assessments, and
procedures of objection and appeal
Article
60 : Declarations
(a)
Every taxpayer required to file a declaration shall file it
in the prescribed form, include its identification number,
and pay the tax due thereon to the Department.
(b)
The tax declaration shall be filed within one hundred and
twenty days following the end of the taxable year for which
the declaration was made.
(c)
The following taxpayers shall be required to file a tax declaration:
- a
resident capital company.
- a
non-resident with a permanent establishment in the Kingdom.
- a
resident non-Saudi natural person who conducts business.
(d)
A taxpayer who ceases business activity is required to notify
the Department and to present within sixty days from the cessation
date a tax declaration for the short taxable period ending
with the date on which it ceases business.
(e)
A taxpayer whose taxable income exceeds one million riyals
(SR 1,000,000) shall have a certified accountant licensed
to practice in the Kingdom certify the correctness of the
declaration.
(f)
A partnership shall file an information declaration in accordance
with Article 36 of this Law, on or prior to the sixtieth day
following the end of its taxable year.
Article
61 : The Department's
Right to Information
(a)
All persons and government bodies shall provide the Department
with any information related to tax requested by the Department
for taxation purposes stipulated in this Law.
(b)
The Department may conduct a filed examination of the taxpayer's
books and records during working hours to ascertain the correctness
of the taxpayer's tax liability.
(c)
All persons and government bodies shall provide the Department
with information on any contracts concluded with the private
sector within three months of the date of conclusion of the
contract. The information shall include names and addresses
of the two parties, subject of contract, its value and financial
terms, and execution and completion dates. A person who does
not provide the Department with what is required under this
paragraph, or does not notify the Department of the date of
cessation of work stated in the contract, is jointly liable
for any tax claim due on the contract. The Regulations shall
specify restrictions and procedures required to implement
this obligation.
Article
62 : Examination
and assessment procedures
(a)
The Department may correct and adjust the tax shown on the
declaration to make it conform to the provisions of this Law,
and it may perform tax assessment if the taxpayer does not
file its declaration.
(b)
The Department shall notify the taxpayer of tax assessment
under paragraph (a) of this Article and the tax due on it
by registered official letter or by any other means that provides
its receipt of the notification.
(c)
Subject to Article 65 of this Law, if it becomes clear to
the Department that the tax it previously accepted is incorrect,
the Department may make an additional assessment on the taxpayer.
The Department shall notify the taxpayer of the additional
assessment and the reasons therefore. The taxpayer may object
to the assessment as stipulated in the rules of objection.
Article
63 : Anti Tax-Avoidance
Measures
(a)
For the purpose of tax determination, the Department may:
- disregard
any transaction with no tax effect;
- re-classify
transactions whose form does not reflect their substance
and put them in their real form.
(b)
The Department may make assessment due on the taxpayer using
the estimated tax method according to facts and circumstances
pertaining to the taxpayer if the taxpayer fails to file its
declaration on time or keep precise accounts and records,
or to comply with the form, pattern and method required in
its books and records.
(c)
The Department may re-allocate revenues and expenses in transactions
among related parties or parties under the same body, so as
to reflect the returns that would have resulted if the parties
were independent and unrelated.
(d)
A taxpayer may not deduct a loss resulting from the transfer
of properties between it and party related thereto. Unless
otherwise provided for by this Law, the loss deduction is
suspended until the related party disposes of the properties
to another unrelated party.
(e)
If an individual taxpayer splits its income and divides it
with another person, the Department may adjust the tax base
of the taxpayer and the other person to prevent any reduction
in the due tax.
(f)
For the purpose of this Article, income splitting means:
- transfer
of income, directly or indirectly, from one person to another
related thereto;
- transfer
of properties, including money, directly or indirectly,
from one person to another related thereto which leads to
the other person's realization of an income from such properties,
if the reason or one of the reasons for the transfer is
to lower the total tax due upon the income of the transferor
or the transferee.
(g)
In determining whether the taxpayer is seeking to split income,
the Department may consider the value given by the transferee.
Article
64 : Related Persons
and Persons under Common Control
(a)
A natural person is considered related to another natural
person if the latter is a spouse or an in-law, or a relative
up to the fourth degree.
(b)
A natural person is considered related to companies of any
type in the following circumstances:
- If
he is a partner in a partnership and he, either alone or
together with a related person or persons under this Article,
controls fifty percent (50%) or more of the rights to its
income or capital, either directly or indirectly through
a subsidiary company or companies of any type.
- If
he is a partner in a capital company and he, either alone
or together with a related person or persons under this
Article, controls fifty percent (50%) or more of the voting
rights or its value, either directly or indirectly through
a subsidiary company or companies of any type.
- As
for agencies administering properties endowed for specific
purposes, a natural person is deemed related thereto if
he benefits or is capable of benefiting from them, either
alone or with a related person or persons, in accordance
with this Article.
(c)
Companies and agencies are deemed under common control if
the same person or related persons control fifty percent (50%)
or more according to this Article as follows:
- With
respect to partnerships, control means the ownership of
rights to its income or capital, either directly or indirectly
through a subsidiary company or companies of any type.
- With
respect to capital companies, control means the ownership
of the voting rights therein or its value, either directly
or indirectly through a subsidiary company or companies
of any type.
- With
respect to agencies that administer properties endowed for
specific purposes, control means the possession of a beneficial
interest in their income or assets.
Article
65 : Statutory Period
of Tax Assessment
(a)
The Department may, with a reasoned notification, make or
amend a tax assessment within five years from the end of the
deadline specified for filing the tax declaration for the
taxable year, or at any time, upon a written consent of the
taxpayer.
(b)
The Department may make or amend an assessment within ten
years of the deadline specified for filing the tax declaration
for the taxable year if a taxpayer does not file its tax declaration,
or it is found that the declaration is incomplete or incorrect
with the intent to tax evasion.
(c)
A taxpayer may request a refund of opeverpaid amounts at any
time within five years from the end of the overpaid taxable
year.
Article
66 : Objection and
Appeal
(a)
The taxpayer may object to the Department's assessment within
sixty days of receipt of the assessment letter. The assessment
shall be final and the tax payable if the taxpayer agrees
to the assessment or does not object to it within the said
period.
(b)
An objection shall not be considered valid unless the taxpayer
has paid the dues for undisputed terms within the period specified
for objection, or has obtained an approval to pay the tax
in installments in accordance with Article 71 of this Law.
(c)
The tax shall be payable upon a decision by the Preliminary
Objection Committee, and shall be considered final unless
the decision is appealed by the taxpayer or the Department
within sixty days from receiving it.
(d)
The Department and the taxpayer may appeal the decision of
the Preliminary Objection Committee before the Appeal Committee
within sixty days from the date of receiving the decision.
(e)
The taxpayer who wants to appeal the decision of the Preliminary
Objection Committee shall fine the application for appeal
within the prescribed period and pay the due tax according
to the mentioned decision or submit an accepted bank guarantee
of the amount.
(f)
The Appeal Committee's decision shall be final and binding
unless appealed before the Board of Grievances within sixty
days from the notification of the decision.
Article
67 : Formation/Jurisdiction
of Preliminary Objection and Appeal Committees
(a)
Preliminary Objection Committees with jurisdiction to settle
tax disputes shall be formed by a decision of the Minister.
(b)
The Council of Ministers shall issue a resolution, pursuant
to a recommendation by the Minister, to from an Appeal Committee
to review the taxpayer's or the Department's appeals to tax-related
decisions issued by the Preliminary Objection Committees.
(c)
The Regulations shall specify the powers, jurisdictions and
work procedures for Preliminary Objection Committees and Appeal
Committees and their members academic and professional experience
and remuneration.
Chapter
Thirteen:
Collection
of Tax
Article
68 : Tax Withholding
(a)
Every resident, whether or not a taxpayer according to this
Law, and any permanent establishment of a non-resident in
the Kingdom which pays an amount to a non-resident from a
source in the Kingdom, shall withhold tax from the paid amount
according to the following rates:
-
Rent - 5%
-
Royalty - 15%
-
Management fee - 20%
-
Payments for air tickets,
air freight and maritime freight - 5%
-
Payments for international
telecommunications services - 5%
-
Any other payments specified
in the By-Law - Not to exceed 15%
In
the case of amounts paid by a natural person, the conditions
for withholding stipulated under this Article shall apply
to the payments pertaining to his activity.
(b)
A person withholding tax under this Article shall comply with
the following:
- registering
with the Department and paying the amount withheld to the
Department within the first ten days from the month following
the month of payment to the beneficiary.
- providing
the beneficiary with a certificate stating the value of
the amount paid to him and the value of the tax withheld.
- providing
the Department, at the end of the taxable year, with the
name, address, and the beneficiary's registration number
(identification number), if available, along with any additional
information the Department may require.
- maintaining
records required to prove the correctness of the withheld
tax as specified by the Regulations.
c)
The person responsible for withholding tax under this Article
is personally liable to pay the unpaid tax and any delay fines
resulting therefrom, in accordance with paragraph (a) of Article
77 of this Law, if any of the following cases applies to him:
- If
he fails to withhold tax as required.
- If
he withholds tax, but fails to pay the tax to the Department
as required.
- If
he fails to report withholding statements to the Department
as stipulated under subparagraph (3) of paragraph (b) of
this Article.
(d)
In addition to what is stated in paragraph (b) of this Article,
if tax is not withheld in accordance with the provisions of
this Article, the beneficiary remains indebted to the Department
for the amount of the tax and the Department may recover it
from him, his agent or sponsor.
(e)
Without prejudice to paragraphs (f) and (g) of this Article,
if an amount is paid to a non-resident and tax is withheld
for it in accordance with the provisions of this Article,
that tax shall be final, taking into consideration that no
further tax shall be imposed on the income from which the
tax was withheld, and not to refund any amount paid as tax
in accordance with this Article.
(f)
If the amount referred to in this Article is paid to a non-resident
who conducts business in the Kingdom through a permanent establishment,
and the amount paid was directly connected with the business
of that establishment, such amount shall be calculated in
determining the tax base of the non-resident.
(g)
If tax is withheld for an amount paid to a taxpayer which
is included in its tax base, the tax withheld shall be deducted
from the tax due on the taxpayer against the tax base.
(h)
For purposes of this Article and Article 5 of this Law, “services”
shall mean any work performed for compensation, except for
the purchase and sale of goods or any other properties.
Article
69 : Tax Payment
A
taxpayer shall pay its due tax in accordance with the declaration
within one hundred and twenty days from the end of its taxable
year.
Article
70 : Advance Payments
of Tax
(a)
without prejudice to paragraph (b) of this Article, a taxpayer
who realizes income in the taxable year shall pay three advance
payments of tax on or prior to the last day of the sixth,
ninth and twelfth months of the taxable year. The amount of
each payment is the result of the following equation:
25%
x (A – B)
where
A is equal to the taxpayer's tax for the preceding year according
to its declaration; and B is equal to the amount of tax paid
in the preceding year by withholding from the source in accordance
with Article 68 of this Law.
(b)
A taxpayer shall not be obligated to make advance payments
under paragraph (a) of this Article if the result of the above
equation is less than five hundred thousand Saudi riyals (SR500,000).
(c)
The Department has the power to reduce any of the payments
due under this Article if it is convinced that the taxpayer's
income for the taxable year, with the exception of the income
of which tax is withheld from the source under Article 68
of this Law, shall be substantially less than the amount of
income for the preceding year.
(d)
A payment made pursuant to this Article is considered a payment
in advance against the taxpayer's total tax for the taxable
year for which the payment was made.
(e)
The provisions of this Law relating to collection of tax and
its mandatory procedures shall apply to advance payments of
tax as they apply to the tax itself.
Article
71 - Payment of
Tax in Installments
(a)
The Minister has the power to allow payment in installments
for amounts due on a taxpayer whenever enough reasons and
justifications exist within the framework of restrictions
and conditions specified in the Regulations. The Minister
may delegate what he deems fit of this authority to the Director-General
of the Department. Further, he or whomever he delegates may
revoke the installment arrangement if he find that the accruals
of the Public Treasury are subject to loss.
(b)
The payment of tax in installments in accordance with this
Article shall not exempt the taxpayer from payment of the
delay fine for the period of installments pursuant to paragraph
(a) of Article 77 of this Law.
Article
72 : Refund of Overpayment
In
the case of an overpayment of tax, the taxpayer is entitled
to a refund of the excess amount together with a compensation
at the rate of one percent (1%) for each thirty days, beginning
thirty days after its claim and continuing until the taxpayer
receives the amount.
Article
73 : Seizure of the
Taxpayer's Property
(a)
If the taxpayer fails to pay a tax due by the dates specified
by Law, the Department may seize the taxpayer's movable and
immovable properties as allowed by Shariah . The
Department may continue with the procedures of seizure after
the passage of twenty days from the taxpayer's receipt of
the Department's noticeof its intention of seizure.
(b)
Any person, including banks and financial institutions, holding
in possession a seized asset, shall deliver the asset to the
Department upon its request.
(c)
A bank or a financial institution shall refrain from allowing
withdrawals or other payments from the taxpayer's bank account
after receiving notice of the Department's intention to freeze
the taxpayer's account.
(d)
A person not complying with the provisions of paragraphs (b)
and (c) of this Article is obligated to pay the Department
an amount equal to the value of the properties in its possession,
not exceeding the amount for which the freezsing was made.
(e)
Tools used by the taxpayer for its trade, and personal effects
and furnishings, are exempt from seizure, with a maximum limit
not exceeding three hundred thousand riyals (SR300,000).
Article
74 : Sale of seized
property
(a)
The Department shall, through the competent body, sell properties
seized in accordance with provision of seizure.
(b)
From the sales returns, the expenses of the seizure and sale
shall be paid first, then tax and fines. Any remaining amount
shall be returned to the taxpayer.
(c)
Sale of the taxpayer's properties shall be suspended during
the period of the administrative or judicial review of the
assessment on the basis of which the seizure was made, except
for:
- perishable properties
- properties sold by the Department
upon the taxpayer's request.
Article
75 : Freezing of
funds due to the taxpayer
(a)
Following the freezing, the Department may issue notices to
a third party, including the employer, banks or financial
institutions, ordering direct payment to the Department of
any funds that the third party owes the taxpayer on or after
the date of receipt of the freezing notification.
(b)
A notice may be issued on the taxpayer's employer, and its
validity may be limited to a specified period.
(c)
The monthly maintenance due upon the taxpayer as well as its
living expenses stipulated by provisions of other laws in
force are not subject to freezing.
(d)
A person complying with the provisions this Article and Articles
73 and 74 of this Law shall be exempted from any obligation
to the taxpayer or any other person, regarding the value of
properties seized from the time of its compliance.
Chapter
Fourteen:
Fines
Article
76 : Fine for failure
to file the declaration
(a)
A taxpayer not complying with the provisions of paragraphs
(a), (b), (d) and (f) of Article 60 of this Law shall be subject
to a fine of one percent (1%) of its gross income provided
that the fine does not exceed twenty thousand Saudi riyals
(SR20,000).
(b)
In case of failure to file the declaration within the prescribed
time, the following fine shall be imposed in lieu of the fine
stipulated under paragraph (a) of this Article, if the fine
under paragraph (a) is less than the amount specified under
this paragraph:
-
Five percent (5%) of the unpaid
tax if the delay does not exceed thirty (30) days specified
by Law.
-
Ten percent (10%) of the unpaid
tax if the delay exceeds thirty (30) days and does not exceed
ninety (90) days of the date specified by Law.
-
Twenty percent (20%) of the
unpaid tax if the delay exceeds ninety (90) days and does
not exceed three hundred sixty-five (365) days of the date
specified by Law.
-
Twenty-five percent (25%)
of the unpaid tax if the delay exceeds three hundred and
sixty-five (365) days of the date specified by Law.
(c)
Unpaid tax shall mean the difference between the amount of
tax due under this Law and the amount paid on the date specified
by Law under paragraph (b) of Article 60 of this Law.
Article
77 : Delay and fraud
fines
(a)
In addition to the penalties stipulated in Article 76 of this
Law and in paragraph (b) of this Article, the taxpayer shall
pay a delay fine of one percent (1%) for every thirty days
of delay on unpaid tax, including delay in payment of tax
required to be withheld and advance payments. It shall be
calculated from the tax due date until the date of payment.
(b)
In addition to the penalties stipulated in Article 76 and
in paragraph (a) of this Article, the taxpayer shall be subject
to a fine of twenty-five percent (25%) of the difference in
tax resulting from the taxpayer's or its certified accountant's
providing false information or from fraud with the intention
of tax evasion, and in particular in the following cases:
- submitting
false books, records, accounts or documents that do not
reflect the true status of the taxpayer.
- filing
a declaration on the basis of unavailability of books or
records, and including therein information that contradicts
what is shown in the taxpayer's books and records.
- filing
forged or fictitious invoices or documents, or changing
of purchase or sale invoices or other documents with the
intention of understating profits or overstating losses.
- not
declaring one or more of the taxable activities.
- destroying
or hiding books, records or documents prior to the Department's
examination.
Article
78 : Liability of
Certified Accountants
Without
prejudice to the Certified Accountants Law, the Department
may prosecute any certified accountant proven to have presented
or certified false statements, which constitutes a violation
of established accounting principles with the intention of
assisting the taxpayer to evade all or part of the tax.
Chapter
Fifteen:
The
Minister's Powers
Article
79 : The Minister's
Power
The
Minister shall have the following powers:
- Issuing
the Implementing Regulations of this Law.
- Issuing
instructions and taking measures he deems necessary for
the implementation of this Law.
- Amending
depreciation groups and rates stipulated in Article 17 of
this Law.
- Canceling
tax debt and fines that have been determined un-collectable.
The Regulations shall specify the cases where collection
is impossible.
- Granting
remunerations upon recommendations by the Department's Director-General
to employees for outstanding performance of their work.
The Regulations shall specify the conditions and restrictions
for such remuneration.
Chapter
Sixteen:
Concluding
Provisions
Article
80 : Law's Effectiveness
Date
1.
This Law shall be published in the Official Gazette and shall
come into effect after ninety days from its publication date.
2.
This Law shall apply to taxable years beginning after the
date of its coming into force. As for taxable years starting
on or prior to the date of its coming into force, they shall
be subject to tax laws in effect prior to the issuance of
this Law.
3.
This Law shall nullify the Income Tax Law issued by Royal
Decree No.3321, dated 21/1/1370 H [2 November 1950]
and its amendments, the Law of Additional Income Tax on Companies
Engaged in Production of Oil and Hydrocarbons issued by Royal
Decree No.7634, dated 16/3/ 1370 H and its amendments, and
the Natural Gas Investment Tax Law issued under Royal Decree
No.M/37, dated 25th Jumada II, 1424 [23 August 2003]
.
4.
Tax withholding provisions of Article 68 of this Law shall
become effective from the date of its coming into force.
Article
81 : Transitional
provisions
1.
In case of acquiring an asset in a taxable year prior to the
effectiveness of this Law, the value to be added to the appropriate
group shall be the cost of the asset minus any depreciation
deduction previously granted to the taxpayer.
2.
Operational losses incurred before the entry into force of
the Council of Ministers' resolution number 3, dated 5/01/1421
H. may not be carried forward.
3.
Operational losses incurred by the taxpayer during a tax exemption
period may not be carried forward.
===
===
|
