The Zakat, Tax and Customs Authority (ZATCA) announced the intensification of its field monitoring efforts, with its teams conducting more than 60,000 inspection visits during the first quarter of 2024. These campaigns targeted markets and commercial establishments in various cities and regions across the Kingdom, as part of its ongoing efforts to enhance tax compliance among businesses and protect consumers.
General context: Tax compliance and Vision 2030
These oversight efforts are an integral part of the economic transformations underway in Saudi Arabia under Vision 2030, which aims to diversify national income sources and reduce dependence on oil. Since its establishment, the Zakat, Tax and Customs Authority has played a pivotal role in the efficient management and collection of zakat, taxes, and customs duties. The implementation of value-added tax (VAT) in 2018 and its subsequent increase in 2020, along with the launch of the electronic invoicing system (Fatoora), are among the most prominent tools contributing to enhanced financial transparency and increased non-oil revenues. This necessitates ongoing inspection campaigns to ensure proper implementation.
Details of the campaigns and the most prominent violations observed
The official spokesperson for the Authority, Hamoud Al-Harbi, explained that the inspections conducted by the monitoring teams covered vital and diverse commercial sectors, most notably retail, tobacco, and public services. These field visits resulted in the detection of several violations of the tax regulations in force in the Kingdom. The most prominent violations included the absence of tax stamps on tobacco products, the collection of value-added tax (VAT) at a rate higher or lower than the established rate, and the failure to issue the electronic tax invoice, which has become mandatory in phases for all taxpayers.
Importance and expected impact
These inspection campaigns are of paramount importance on several levels. Locally, they contribute to achieving tax fairness among taxpayers and ensure fair competition in the market, thus preventing irregular business practices. Furthermore, enhanced tax compliance leads to increased government revenues, which are then allocated to funding development projects and public services such as health, education, and infrastructure. Regionally and internationally, an effective and transparent tax system boosts foreign investor confidence in the Saudi business environment, making the Kingdom a more attractive investment destination, in line with global best financial practices.
Call for community participation
The Authority reiterated its call for consumers to be partners in the oversight process by reporting any establishment found to be in violation of tax regulations. The Authority has provided multiple channels for receiving reports, including its official website (zatca.gov.sa) and its mobile application (ZATCA), which allows for immediate reporting. To underscore its commitment to combating tax evasion, the Authority offers incentive rewards to those who report violations, amounting to 2.5% of the value of the violations and fines, with a maximum of one million Saudi riyals and a minimum of 1,000 riyals.
