tax return

tax return

A tax return is a pivotal tool in the modern financial system, requiring taxpayers to provide accurate and comprehensive data on their income or financial transactions within a specified period of time, in preparation for calculating and paying the tax due. A tax return is essentially a legal obligation and a means of control that enables tax authorities to ensure compliance and transparency in economic activities.

But although business owners realize the importance of this commitment, the most important question always remains: Am I presenting it correctly? Here comes the role of tax advice from the office of lawyer Abdul Majeed Al-Rasheed, with a lawyer specializing in taxes and zakat, to review all your data or your facility until the declaration is submitted, in clear steps.

Definition

A tax return is a statement submitted by the taxpayer, detailing his taxable income or transactions, and the amounts due. This declaration is considered an acknowledgment by the taxpayer of the fact that he is subject to tax, which has legal consequences.

In the Kingdom of Saudi Arabia, the Zakat, Tax and Customs Authority (ZATCA) defined it as: “The declaration submitted by the taxpayer according to approved forms, which includes the data and information necessary to determine the value of the tax due during the specified period.”

Tax return

When should it be submitted?

The taxpayer is required to submit the declaration no later than the last day of the month following the end of the relevant tax period.

Why is it important?

A tax return is not just an obligation; it also achieves a number of important goals, including:

• It represents the basic tool that the Authority relies on to estimate tax and accurately verify the validity of the taxpayer’s obligations.
• It contributes to achieving tax transparency and compliance, as it determines the amount of tax based on it in proportion to the taxpayer’s activity.
• It helps avoid disputes between the facility and the Authority by having an official statement approved by the taxpayer.
• The taxpayer avoids fines and regulatory procedures resulting from delays or errors.
• It represents one of the state’s public financial sources, as tax revenues go to financing government services and projects.

Tax return

Legal framework for tax return

The Executive Regulations for Value Added Tax and the Executive Regulations for Income Tax regulate the obligations of those responsible for submitting declarations through the Authority’s portal, whether on a monthly, quarterly, or annual basis, depending on the type of tax.

In other systems, such as American or European, the tax return is treated as a material obligation, and failure to do so results in fines or even criminal liability.

Who is required to submit a declaration and what is the mandatory registration limit?

According to Chapter Two of the VAT Executive Regulations, a taxable person is:

• Anyone who carries out an independent economic activity with the intention of generating income, and has been registered or considered obligated to register for value-added tax purposes (Article 2).
• Persons residing in the Kingdom whose supplies exceeded the mandatory registration limit within a period of 12 months are required to register within 30 days of the end of the month in which the exceedance was achieved (Article 3).
• Resident persons whose future supplies are expected to exceed the mandatory registration limit within a subsequent 12 months (Article 4).
• Non-resident persons who are obligated to pay tax on supplies they make or receive in the Kingdom (Article 5).
• Even if the person obligated to register fails to apply, the Authority has the authority to register him directly (Article 6).
• The regulation also allows optional registration for the resident person if his supplies or expenses reach the optional registration limit (Article 7).

What is the mandatory registration limit for the declaration?

The regulations stipulate that the mandatory registration limit is 375,000 Saudi riyals of annual supplies. The optional registration limit is 187,500 Saudi riyals.

Therefore, every registered person, whether by mandatory or optional registration, is considered one of the entities obligated to submit the tax return to the General Authority of Zakat, Tax and Customs within the specified regular period

What does a tax return include?

The contents of the return vary depending on the type of activity, but the executive regulations require that the tax return include basic elements such as:

• Total value of taxable supplies at 15%.
• Supplies subject to zero% tax.
• Assumed supplies.
• Total output tax.
• Total deductible input tax.
• Amendments to input tax.

Types of tax returns

The tax return takes several forms:

• Annual tax return: Usually submitted by companies or individuals subject to income tax.
• Periodic tax return (monthly/quarterly): such as a value-added tax return (VAT).
• Amended declaration: Submitted by the taxpayer if he discovers an error or deficiency in his previous declaration. The Authority shall be notified within 20 days of learning of the error
• Corrective declaration: after requesting the authority or discovering tax differences.

Steps to submit a declaration through the Zakat, Tax and Customs Authority platform

• Access the Authority’s electronic portal.
• Choose a service “submit a declaration”.
• Enter the financial data required for the tax period via the unified form
• Review and save the declaration.
• Send the declaration electronically.
• Payment of the tax due.

The most common mistakes when submitting a tax return

Despite the simplicity of the steps for submitting a declaration, some errors are noticeably repeated among taxpayers, such as:

• Entering inaccurate data about sales or purchases.
• Delay in submitting the declaration after the specified date.
• Omission of certain taxable supplies.

Can the declaration be amended or corrected?

Yes. Article (63) stipulates that a taxpayer who discovers an error in his declaration that leads to a decrease in the value of the tax due must notify the Authority of this within 20 days from the date he becomes aware of the error.

Effects of not filing or filing a tax return incorrectly

Delaying the submission of the declaration or entering inaccurate data may expose the taxpayer to a number of procedures, most notably:

• The Authority shall conduct the examination and assessment itself: If you do not submit the declaration, the Authority has the authority to assess the tax due and notify you of it directly.
• The Authority can also ask you to pay the estimated amounts, request financial guarantees, or even make a set-off with any amounts you have with other parties.

Sixth: The legal effect of the declaration

• A declaration is a judicial declaration of a financial incident that the Authority can rely on before judicial authorities.
• This requires the taxpayer to pay the tax due.
• It is considered an executive document if approved by the Authority, allowing the continuation of compulsory collection procedures in the event of non-payment.

How does a tax attorney help you when filing a tax return?

Dealing with a tax return may seem simple in its electronic form, but it actually requires accuracy and follow-up so that you do not make costly mistakes. Here the role of consulting a tax lawyer from Abdul Majeed Al Rashid Law Firm and Legal Consultations emerges, as it helps you in:

• Careful review before filing: The attorney makes sure that sales and purchase data is complete and correct, so that you do not face feedback or fines later.
• Clear legal and tax guidance: It shows you what provisions apply to your activity, and what rights and obligations may not be clear to you as a taxpayer.
• Post-declaration follow-up: His role does not stop at submitting, but rather follows up with you on any requests for clarification from the Authority or appeal procedures if necessary.

Tax return

Finally

A tax return is not just a formality; it is a fundamental pillar for ensuring the integrity of the financial system and protecting the national economy from tax evasion. The development of electronic systems in Saudi Arabia and elsewhere has contributed to enhancing compliance and achieving transparency. However, the effectiveness of the tax return remains linked to the extent of taxpayers’ commitment and awareness, and the strict application of penalties to violators.