The Zakat, Tax and Customs Authority in Saudi Arabia announced an update to the terms and conditions for installment payments of tax and zakat dues. This step aims to balance facilitating compliance for taxpayers with ensuring the collection of state revenues. Under the new procedures, the Authority requires taxpayers wishing to pay zakat, income tax, or value-added tax (VAT) in installments to pay at least 20% of the total amount due as a down payment when submitting the application.
Details of the new terms and procedures
To ensure transparency and seriousness in applications, the authority has set a number of requirements that must be met to approve an installment plan, including:
- Down payment: 20% of the total debt amount must be paid immediately upon application.
- Proof of need: The taxpayer must declare electronically that he does not have sufficient funds to pay the full amount due.
- Financial documents: The applicant is required to attach recent statements for the last 3 months for all his commercial and personal bank accounts, in addition to financial statements for the last 3 years.
- Authority's powers: The Authority reserves the right to cancel the installment plan if the taxpayer fails to pay two consecutive installments, or if it is proven that he has the financial ability to pay the full amount due.
The new system also allows taxpayers flexibility in choosing the bills to be paid in installments, and determining the payment frequency (monthly, quarterly, semi-annually, or annually) in accordance with their cash flows.
General context and importance of the decision
This decision comes as part of the ongoing efforts of the Zakat, Tax and Customs Authority to develop the Kingdom's financial regulatory environment, in line with the goals of Saudi Vision 2030, which aims to diversify income sources and enhance non-oil revenues. Since the implementation of Value Added Tax (VAT) in 2018 and its subsequent increase, the Authority has worked to establish mechanisms that ensure tax compliance without overburdening the business sector, particularly small and medium-sized enterprises (SMEs) that may face liquidity challenges.
Expected impact on the economy and business sector
These new conditions are expected to have a multifaceted positive impact. Domestically, this mechanism provides a lifeline for companies facing temporary financial difficulties, helping them to continue operating and grow instead of succumbing to tax debt. The down payment requirement also enhances the seriousness of applications and ensures that a portion of the revenue flows to the public treasury immediately.
Regionally and internationally, this measure reflects the development of the Saudi tax system and its alignment with global best practices, offering flexible payment plans for compliant taxpayers. This enhances the attractiveness of the Kingdom's investment environment and presents an image of a supportive and stable regulatory framework for businesses, which encourages foreign direct investment and bolsters confidence in the national economy.
