Correction of errors in the VAT return. 

Value Added Tax (VAT)  is an indirect tax levied on most goods and services supplied in the Kingdom of Saudi Arabia. Establishments registered in this tax are obliged to submit periodic returns containing details of sales and purchases and the value of the tax due. However, it may happen that businesses make mistakes when submitting these returns, which requires correction to avoid penalties and ensure compliance with tax regulations.

The importance of correcting errors in tax returns

Correcting errors in tax returns is not only a legal obligation, it is also a way to maintain the reputation of the enterprise and avoid financial fines. The Zakat, Tax and Customs Authority seeks to enhance transparency and compliance by providing mechanisms to correct these errors.

Steps to correct errors in a VAT declaration

To correct errors in your VAT return, follow these steps:

1.  Login to the Authority's portal: The taxpayer must log in to his account on the Zakat, Tax and Customs Authority website.

2.  Go to the Declarations section: After logging in, the "Declarations" service is selected from the main menu.

3.  Choose the declaration to modify:  Select the declaration that contains the error and that needs to be modified.

4.  Submit the amendment request: After selecting the acknowledgment, an amendment request is submitted stating the reasons and attaching supporting documents if necessary.

5.  Receive Notice of Amendment: After submitting the application, the Authority will review it, and a notification will be sent to the taxpayer of the outcome of the review.

According to the Zakat, Tax and Customs Authority, a taxpayer can amend any old declaration as long as it is not under scrutiny. If it is under examination, the amendment can be made by contacting the Authority.

Fines for errors in tax returns

The Authority imposes fines on some VAT-related violations, including:

1.  Failure to file tax return on time: A fine ranging from 5% to 25% of the tax due.

2.  Failure to pay the tax due on time:  A fine of 5% of the value of the unpaid tax for each month or part thereof in which the tax has not been paid.

3.  Filing an erroneous tax return or amending a tax return after filing, resulting in an error in calculating the tax amount less than due: a penalty of 50% of the difference between the tax calculated and due. 

A practical example of correcting an error in a tax return

Position: An entity submitted a tax return for the first quarter, and after submission it discovered that it forgot to include a sales invoice of SAR 100,000.

Procedure:

1.  Identify error: The entity realized that it did not include a sales invoice of 100,000 riyals, which means that the tax due is an underestimate.

2.  Login to the portal: Login to the establishment's account on the Authority's website.

3.  Amendment of the declaration: Choose the previously submitted declaration and submit an amendment request to add the forgotten invoice.

4.  Difference payment: After accepting the amendment, the difference in tax due is paid.

The result: by correcting the error and paying the difference, the entity avoids potential fines and remains compliant with tax regulations.

Tips to avoid errors in tax returns

1.  Careful review: Before filing the declaration, you must review all invoices and ensure that the information is accurate.

2.  Use reliable accounting systems: Relying on accounting programs that help organize and document financial operations.

3.  Continuous Training: Training of accounting and tax officials to ensure their understanding of systems and procedures.

4.  Record Retention: Keep all documents and invoices for a specified period of time in anticipation of any future review.

Correcting errors in VAT returns is an essential part of businesses' compliance with the tax regulations in the Kingdom of Saudi Arabia. By following the right steps and continuous communication with the Zakat, Tax and Customs Authority, businesses can correct errors and avoid fines, which contributes to enhancing confidence and transparency in financial transactions.