Saudi Arabia ZATCA, VAT & corporate tax compliance is one of the most important responsibilities for new businesses in the Kingdom. If you miss registrations or filings in your first year, penalties can apply quickly.
This guide explains what you must do in your first year, in simple and practical language, whether you are a foreign investor, startup, or SME.
Table of Contents
What is ZATCA in Saudi Arabia?
Zakat, Tax and Customs Authority (ZATCA) is the government body that manages:
- Zakat
- Corporate Income Tax
- Value Added Tax (VAT)
- Withholding Tax
- E-invoicing (FATOORA)
- Customs duties
Every company registered in Saudi Arabia must deal with ZATCA from the first year itself.
First-Year ZATCA Obligations for New Businesses
Once your company is registered, ZATCA compliance starts immediately.
Key first-year requirements include:
- ZATCA registration
- VAT registration (if applicable)
- Corporate tax or zakat assessment
- E-invoicing setup
- Timely return filings
- Maintaining proper accounting records
Ignoring any of these can lead to fines, account suspension, or audit notices.
VAT Registration in Saudi Arabia
VAT registration is mandatory if your annual taxable turnover exceeds SAR 375,000.
VAT registration types:
- Mandatory VAT registration – Above SAR 375,000
- Voluntary VAT registration – Between SAR 187,500 and SAR 375,000
- Not required – Below SAR 187,500
VAT rate in Saudi Arabia is 15%.
VAT Filing & Compliance Rules
Once registered, VAT compliance becomes a regular process.
VAT filing frequency:
- Monthly filing – Large businesses
- Quarterly filing – Small and medium businesses
What you must do:
- File VAT returns on time
- Pay VAT dues before the deadline
- Maintain VAT invoices
- Follow ZATCA e-invoicing rules (Phase 1 & Phase 2)
Late filing or incorrect VAT returns attract heavy penalties.
Corporate Income Tax & Zakat Basics
Your tax obligation depends on company ownership.
| Aspect | Corporate Income Tax | Zakat |
|---|---|---|
| Applicable to | Foreign-owned companies | Saudi or GCC-owned companies |
| Governing authority | ZATCA | ZATCA |
| Basis of calculation | Net profit | Zakat base (not profit) |
| Standard rate | 20% | Calculated as per Zakat regulations |
| Filing requirement | Annual tax return | Annual Zakat return |
| Applies in mixed ownership | Applied on foreign ownership portion | Applied on Saudi/GCC ownership portion |
For companies with mixed ownership, corporate income tax and Zakat are applied proportionately based on ownership structure.
Withholding Tax Obligations
If your Saudi company pays a non-resident for services, withholding tax may apply.
Common withholding tax rates:
- Management services
- Technical services
- Royalties
- Consultancy services
Failure to deduct or report withholding tax can result in penalties and disputes.
Common First-Year Mistakes to Avoid
Many businesses face issues in their first year due to these mistakes:
- Delaying VAT registration
- Assuming no activity means no filing
- Ignoring e-invoicing requirements
- Poor bookkeeping
- Missing ZATCA deadlines
- Wrong tax classification
Saudi Arabia rewards correct setup, not fast setup.
How MajuBiz Helps You Stay Compliant
At MajuBiz, we manage your end-to-end Saudi compliance, including:
- ZATCA registration
- VAT registration & filings
- Corporate tax & zakat filings
- E-invoicing setup
- Accounting & compliance support
- Advisory for foreign investors
Our goal is to keep your business fully compliant from day one, so you can focus on growth.
FAQs
Is VAT mandatory for all businesses in Saudi Arabia?
Do I need to file tax returns if my company has no income?
What happens if I miss a ZATCA deadline?
Is e-invoicing compulsory in Saudi Arabia?
Can foreigners own 100% of a Saudi company and pay tax?
Final Note
Saudi Arabia ZATCA, VAT & corporate tax compliance in the first year sets the foundation for your business.
Getting it right early saves time, money, and legal trouble later.
If you want stress-free compliance, professional guidance makes all the difference.
