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Financial Record Keeping Requirements in Saudi Arabia Pose Significant Compliance Challenges

Introduction

Maintaining accurate and up-to-date financial records is a critical aspect of doing business in Saudi Arabia. However, the Kingdom’s Zakat, Tax and Customs Authority (ZATCA) imposes strict requirements on taxpayers to keep their accounting books and records in Arabic.

Key Requirements

According to Article 58 of Saudi Arabia’s tax law, as well as Article 56 of the tax by-laws, ZATCA has the right to examine the original invoices, day journals, general ledgers, and inventory books. Taxpayers are also required to maintain a full audit trail of income and expenses reported in their returns, which must reconcile with trial balances extracted from general ledgers.

  • Original Invoices and Records: ZATCA has the right to examine the original invoices, day journals, general ledgers, and inventory books.
  • Audit Trail: Taxpayers are required to maintain a full audit trail of income and expenses reported in their returns, which must reconcile with trial balances extracted from general ledgers.

Consequences of Non-Compliance

Failure to comply with these requirements can result in ZATCA rejecting tax returns and issuing assessments, leading to tax liabilities and penalties. In cases of non-compliance, ZATCA has the right to use its own values to determine tax liabilities where it is unable to access the required information.

  • Tax Return Rejection: Non-compliance with financial record keeping requirements can result in ZATCA rejecting tax returns.
  • Assessments and Penalties: This can lead to tax liabilities and penalties.
  • Determining Tax Liabilities: In cases of non-compliance, ZATCA has the right to use its own values to determine tax liabilities.

What Taxpayers Need to Do

To avoid these consequences, taxpayers must ensure that:

  • Accurate Record Keeping: Information is accurately entered from accounting books in Arabic.
  • Original Documents: Original documents supporting the accounting records are held in Saudi Arabia.
  • Financial Statements: Financial statements are extracted directly from computer systems.
  • Reconciliations: Reconciliations in Arabic are available for both traditional and computerized records.
  • Data Management: Information flows and document data entry procedures are managed effectively.
  • Data Integrity: Adequate safety procedures and controls are in place to protect data integrity.

Support from Keypoint

Keypoint’s multi-lingual tax team, which includes Saudi and GCC nationals, can assist taxpayers with the translation of books and records while maintaining a close eye on technical and other administrative aspects of taxation. For more details, please contact us.

Contact Tax Professionals

If you need assistance with financial record keeping requirements in Saudi Arabia, please contact:

  • Raman Ohri: Direct Tax Leader - raman.ohri @keypoint.com | +966 50 286 4266
  • George Cambell: Senior Director | Tax Advisory - george.campbell @keypoint.com | +966 53 250 9866
  • Tariq Haq: Senior Manager - tariq.haq @keypoint.com | +973 3628 3351
  • Ali Almohammedali: Managing Director | Alnuqtah Alraisiyyah for Accounting Consultancy - ali.almohammedali@keypoint.com | +966 54 541 8183
  • Dinesh Ravi: Manager - dinesh.ravi@keypoint.com | +966 50 063 8571
  • Adil Fawzi: Manager - adil.fawzi@keypoint.com | +966 53 251 0366