What is Tax Compliance?
Tax compliance is the act of meeting all legal obligations related to taxes, including correct calculation, timely filing of returns, and full payment of any amounts due. It also covers maintaining the records needed to support filings during inspection.
How It Works
- Identify every tax the business is subject to (VAT, zakat, corporate income tax, withholding tax, excise, customs).
- Track filing and payment deadlines for each tax in a compliance calendar.
- Maintain supporting documentation (invoices, contracts, ledgers) per ZATCA retention rules, typically 6 years.
- Respond promptly to any clarification or audit request from ZATCA.
Saudi Context
In Saudi Arabia, the Zakat, Tax and Customs Authority (ZATCA) administers all federal-level taxes. Penalties for late filing start at SAR 1,000 and can reach 25% of the unpaid amount for VAT. The e-invoicing Phase 2 (Fatoora) is now mandatory for VAT-registered businesses above ZATCA-defined thresholds.
Example
A Saudi company files its quarterly VAT return by the 28th of the month following the quarter-end, its zakat declaration within 120 days of year-end, and any withholding tax within 10 days after month-end. All three are part of its compliance calendar.