The General Authority for Zakat and Tax (GAZT) of Saudi Arabia published Circular Number 6768/16/1438 (the Circular) on 4 December 2016 (5/3/1438H) according to which Saudi listed companies are now required to pay tax and zakat based on the nationality of the shareholders as per the Tadawulaty System at the end date of the year. This new requirement is applicable from the issuance of this Circular which is 4 December 2016.
According to the circular prior year assessments will be finalized in accordance with the information available. The advance tax payment will be required in following years based on the amount of corporate tax paid in the preceding year. Saudi listed companies that are already subject to zakat and tax according to this circular will no longer able to file a consolidated zakat return. Each wholly owned subsidiaries will file tax return independently.
Items such as, repairs and maintenance of fixed assets and interest charges which are deductible for zakat purposes may no longer be deductible in full for tax purposes
The ownership information of the company on the electronic filing system (ERAD) will have to be updated each year to reflect the ownership as per the Tadawulaty System at the end of the year.
Companies are needed to create provisions for tax and zakat in their financial statements based on the ownership information as per the Tadawulaty System.
