As the fiscal year progresses, businesses in Saudi Arabia must ensure they fulfil their obligation to make advance tax payments, especially those with significant prior-year tax liabilities. In accordance with article 70 of Tax law and article 64 of tax by-laws, taxpayers whose previous-year tax liability was SAR 2 million or more are required to make advance payments in three equal instalments.

Key Details

• These advance payments are due on the last day of the 6th, 9th, and 12th months of the tax year.
• Each instalment is calculated as 25% of the prior year’s tax liability (after adjusting for any withholding).
• If your computed instalment is less than SAR 500,000, you are not required to make advance payments.
• Taxpayers can request ZATCA for reduction in advance tax instalment amount provided certain conditions are met. However, taxpayers will have to pay full amount of first instalment.
• Late payment carries a penalty of 1% of the amount due for every 30 days of delay.

Act Now

• Risk of Penalties: Missing or delaying these payments can trigger significant fines.
• Cash-Flow Planning: Proactive cash flow planning is essential to ensure timely settlement without straining financial operations.
• Accurate Forecasting: Reassess your projected revenue (income statements) now, especially if business conditions have shifted since last year and you intend to reduce instalment amount.
• Expert Support: If there is any uncertainty, consult your A&M advisor immediately, it is critical to confirm your liability and avoid surprises.