Value Added Tax (VAT) has become an essential part of doing business in Saudi Arabia. While most companies understand the basic requirements, many still make mistakes that can lead to penalties, delayed refunds, or compliance risks. In this article, we highlight the most common VAT mistakes businesses make and offer practical tips on how to avoid them.
1. Claiming Input VAT That Is Not Eligible
To begin with, one of the most frequent errors is claiming input VAT on non-deductible expenses, such as:
- Entertainment or hospitality expenses not related to business operations
- Invoices that do not include the correct VAT registration number
- Invoices not issued in the name of the business
How to avoid it:
To prevent this issue, ensure that any invoice you plan to claim VAT on is issued by a VAT-registered supplier, includes the correct VAT details, and clearly shows your company name.
2. Issuing Non-Compliant Tax Invoices
Secondly, some companies issue invoices that fail to meet the requirements of a valid tax invoice under Saudi VAT law. Examples include:
- Missing issue date
- No VAT percentage or VAT amount shown
- Missing VAT registration number
- Not issued through an approved e-invoicing system
How to avoid it:
To stay compliant, Use a ZATCA-compliant e-invoicing system and make sure your team is trained on the minimum requirements for issuing tax invoices.
3. Late Filing or Late Payment of VAT Returns
Another common pitfall is missing the deadline to submit VAT returns or failing to pay the due tax on time. This can result in financial penalties of up to 25% of the unpaid VAT amount.
How to avoid it:
To avoid unnecessary penalties, consult one of our team members who can help you manage deadlines and ensure timely submissions. Consult one of our team to help you in that.
4. Failing to Update VAT Registration Information
In addition, businesses sometimes neglect to update their VAT registration details when there are changes such as a new bank account, business address, or company structure.
How to avoid it:
To remain up to date, promptly update your VAT profile on ZATCA’s portal whenever there are changes to your business information to stay in compliance.
5. Relying Entirely on External Consultants Without Oversight
Finally, while external tax consultants and accountants are helpful, some businesses rely on them entirely without any internal verification or oversight.
How to avoid it:
For better control, assign someone within your organization to regularly review VAT filings, invoices, and compliance matters—even if an external party is managing the process.
Conclusion
In summary, proper VAT compliance requires attention to detail, ongoing training, and strong internal controls. By avoiding these common mistakes, businesses in Saudi Arabia can reduce the risk of penalties, improve operational efficiency, and maintain a strong relationship with the Zakat, Tax and Customs Authority (ZATCA).
