Financial Crime World

Financial Record Keeping Requirements in Saudi Arabia: A Must for VAT Compliance

Introduction

The Kingdom of Saudi Arabia (KSA) has made it mandatory for taxable persons to maintain certain financial records related to Value Added Tax (VAT) compliance. These records are crucial for documenting the calculation and reporting of VAT, as well as facilitating audit purposes.

Required Documents

Taxpayers must retain the following documents:

  • All tax invoices issued and received: This includes both domestic and international transactions.
  • Books and accounting documents: Financial statements, ledgers, and journals are essential for accurate recording of transactions.
  • Contracts or agreements for large sales and purchases, or relevant correspondence detailing particulars of supplies: These records help ensure that supplies are accurately recorded in VAT returns.
  • Bank statements and other financial records: Bank accounts, cash flow statements, and other financial documents are required to support VAT calculations.
  • Import, export, and shipment documents: Customs clearance documents, bills of lading, and commercial invoices must be retained for auditing purposes.
  • Other records relating to VAT calculation and preparation of VAT returns: Any additional documentation that supports VAT calculations and returns is necessary.

Record Keeping Requirements

These records must be kept in either written or electronic form within KSA. If taxpayers choose to store records electronically, the computer system or physical server must be located within the country. In cases where the central server is not in KSA, a computer terminal with data and entries regarding VAT accounting in KSA should be accessible.

Retention Period

The retention period for VAT record keeping varies depending on the type of records:

  • Standard cases: 6 years
  • Moveable and intangible capital assets: 11 years
  • Real estate industry: 15 years

Non-Resident Taxable Persons

Non-resident taxable persons who do not own an establishment within KSA must appoint a tax representative to maintain invoices, books, records, and accounting documents. If the non-resident does not have a tax representative, they must appoint a third party to comply with VAT record and storage requirements.

Additional Requirements

Taxpayers currently using the cash accounting scheme must maintain records related to their annual turnover as proof of eligibility for this scheme. Suppliers of eligible used goods who opt for the profit margin method to calculate tax on such supplies must also preserve records of all eligible goods purchased and supplied by taxable persons.

In cases where additional records are required during registration, examination, or assessment procedures, taxpayers have 20 days to submit the requested documents.

Penalties

Failure to maintain VAT records as per the rules and regulations may result in a fine of up to SAR 50,000. Therefore, it is essential for taxable persons to adhere to these requirements to ensure compliance with VAT laws and regulations in KSA.