1. What is the most significant change to your region/jurisdiction’s tax legislation or regulations in the past 12 months?
Over the past year, the Kingdom of Saudi Arabia's (KSA’s) tax landscape has experienced transformative changes. Of particular note has been the implementation of e-invoicing regulations, which is expected to reshape the nature of tax audits conducted by the Zakat, Tax, and Customs Authority (ZATCA). Additionally, there have been significant changes to the value added tax (VAT) regulations and the real estate transactions tax (RETT) regulations. These amendments have created an added layer of complexity, especially concerning the application of these taxes and the recovery of input VAT by real estate companies.
2. What has been the most significant impact of that change?
The realm of tax audits and compliance within the KSA has been significantly affected by these changes. The advent of e-invoicing is set to transform the audit process, establishing a seamless data collection method while reducing errors and improving transparency. This technology-driven strategy will empower ZATCA to identify potential tax risks more efficiently, thereby reinforcing businesses' adherence to tax rules.
This advancement in ZATCA's ability to detect tax risks and enforce regulations is propelling a shift toward a more just and efficient tax system in KSA.
The modifications in VAT and RETT regulations have led to a fundamental change in how real estate companies handle their tax matters. We have observed that navigating these new regulations has become complex, underscoring the need for specialised guidance and creating a dynamic space for tax advisers and specialists.
3. How do you anticipate that change impacting your work and the market moving forward?
The recent regulatory changes are set to significantly influence both our operations at Deloitte and the wider Saudi Arabian market. As a leading tax advisory organisation, we anticipate a surge in demand for our specialised guidance, particularly as businesses grapple with these comprehensive modifications. A notable point of consideration is the inherent complexity and rapid transformation of the market, particularly in alignment with the KSA Vision 2030. Recognising this, ZATCA has intensified its outreach to taxpayers, providing support and clarity. We have also strengthened our liaison with ZATCA to serve our clients and bridge any communication gaps our clients may have with the authorities to make them more effective.
For example, with the introduction of e-invoicing in the KSA, we have taken a proactive step by establishing our internal e-invoicing tool named INTax. This tool can be seamlessly linked to taxpayers' systems, creating smooth integration with ZATCA's system. This not only enhances the accuracy and efficiency of the auditing process, but also demonstrates our commitment to staying at the forefront of technological advancements for the benefit of our clients.
Moreover, the evolution of VAT and RETT regulations will be instrumental in shaping our advisory methodologies. Our strategy will involve building stronger relationships with real estate enterprises and guiding them through these regulations. This proactive engagement will not only enable them to manage potential penalties, but also provide them opportunities to effectively manage their tax strategies for sustained operational efficacy.
4. How has this changed the way you offer tax advice?
In light of these changes, our approach to offering tax advice has undergone a transformative shift. The expanded demand for our specialisation in navigating the complex regulatory landscape has compelled us to adapt swiftly. We are combining our traditional tax acumen with a digital-savvy perspective, allowing us to guide businesses effectively through the e-invoicing implementation and its subsequent implications, using tools like INTax to facilitate seamless integration.
Furthermore, the nuanced modifications to VAT and RETT regulations require us to offer tailored advice, considering the specific challenges faced by real estate companies. This strategic recalibration enables us to empower our clients with the necessary tools to effectively manage their tax positions while complying with evolving regulations.
5. What potential other legislative/regulatory changes are on the horizon that you think will have a big impact on your region/jurisdiction?
Looking ahead, several legislative and regulatory changes hold the potential to significantly impact the tax landscape in the KSA. One prominent area of consideration is the potential expansion of the tax base.
The KSA government might consider introducing new taxes or revisiting existing ones to further diversify revenue streams. Additionally, adjustments to transfer pricing regulations and the introduction of stricter anti-tax avoidance measures could reshape cross-border transactions and international tax planning strategies.
In the long run, a streamlined, transparent, and technologically advanced tax system can foster better compliance, reduce discrepancies, and increase trust between the government and stakeholders.
6. What are the potential outcomes that might occur if those changes are implemented?
Looking ahead, the Saudi Arabian tax landscape holds the potential for further transformation with a range of legislative and regulatory changes that could be considered by the tax authority. One noteworthy area of exploration is the introduction of environmental taxes. These taxes, targeted at activities or products that pose harm to the environment, could signal the KSA's commitment to sustainable practices, aligning with global environmental agendas.
Additionally, another potential change that the tax authority could consider is the implementation of tourist taxes. These taxes, typically added to hotel bills or flight costs, could play a pivotal role in funding tourism-related infrastructure and services. Such initiatives not only contribute to the country's development but also underscore the KSA's increasing appeal as a tourist destination.
These potential changes underscore the country's dynamic approach to revenue diversification and sustainable development, further shaping its economic and fiscal landscape. As these changes materialise, our commitment to staying ahead of the curve and offering pertinent advice remains unwavering.
7. Do you think that change will have a positive effect on both your practice and the wider regional/jurisdictional market?
Absolutely. While change invariably presents initial challenges, it also brings opportunities. For our tax practice at Deloitte, these evolving regulations signify more businesses needing specialist guidance. For the wider KSA market, a modernised tax system can enhance investor confidence and facilitate easier business operations, propelling economic growth.
8. Are there any regulatory/legislative changes you believe should be implemented in your region/jurisdiction?
When it comes to regulations and laws, there is room for improvement, even though the KSA has made great progress in tax legislation. One thing to consider would be to simplify tax procedures, especially for small and medium-sized enterprises (SMEs). By making rules easier to understand and providing better guidance, we can help SMEs follow the rules more easily. This could create a friendlier environment for businesses to thrive and contribute to the country's economic growth.
In addition, as the financial services and fintech sectors grow with new companies and innovative products, it is important to update the rules carefully. This is especially important given the rapid changes in these sectors and the need to adopt rules that strike the right balance between allowing innovation and protecting consumers.
9. How do you believe those changes would help improve the tax landscape in your market?
By simplifying tax procedures and offering clearer guidance, businesses might have better compliance rates, reducing instances of non-compliance due to misunderstandings. This can lead to a more transparent and efficient tax landscape where businesses can focus on growth and innovation rather than navigating convoluted administrative processes. Ultimately, an improved tax landscape can enhance investor confidence, attract foreign investment, and contribute to the sustainable growth of the KSA market.
10. How are issues surrounding the taxation of the digital economy affecting your work?
As the digital economy rises, there is an increased emphasis on guiding businesses through e-commerce transactions, cross-border digital sales, and other facets of the digital realm. This expands the scope of our work, necessitating more in-depth knowledge and specialisation in this burgeoning area.
At Deloitte, our focus extends to generative AI solutions that should have transformative effects on businesses and our practices. This new frontier offers a paradigm shift in how we approach tax compliance, risk assessment, and strategic decision-making in the digital landscape.
To stay at the forefront of this technological wave, we have taken proactive measures. Deloitte is investing in an internal AI tax tool designed to augment our capabilities. Furthermore, our strategic collaboration with the use of tax-appeal AI tools, such as moonlit.ai, amplifies our efforts. This collaboration equips us with a robust toolset to navigate complex tax appeal cases across more than 15 European countries. The insights gained from this tool can serve as a benchmark to guide clients through tax controversies, leading to informed decisions and improved outcomes.
As the digital economy continues to unfold, our commitment to harnessing AI-driven solutions underscores our dedication to providing innovative and effective tax advisory services in this ever-evolving landscape.
11. How would you describe the tax authorities’ approach in your region/jurisdiction?
ZATCA’s approach has demonstrated a proactive stance in adapting to the evolving tax landscape that is characterised by a harmonious blend of vigilance, engagement, and responsiveness.
ZATCA's emphasis on tax audits as a pivotal compliance tool showcases its commitment to upholding tax legislation and maintaining accurate reporting. Additionally, the recent implementation of e-invoicing stands as a testament to the tax authority’s embrace of technological advancements. By streamlining data collection and enhancing transparency, this initiative exemplifies its forward-looking perspective and determination to improve tax administration.
Furthermore, ZATCA's proactive outreach to taxpayers, coupled with efforts to provide clarity and support, portrays an understanding of the challenges businesses face in this complex regulatory landscape. This engagement underscores a collaborative approach, enhancing compliance while fostering an environment conducive to economic growth.
Overall, the KSA tax authority’s approach reflects a dynamic and adaptive strategy. As industry dynamics shift, it continues to refine its methods to check compliance, embrace technology, and engage with stakeholders. This approach not only strengthens the tax system but also supports the KSA's broader economic goals, including those outlined in the visionary KSA Vision 2030.
Tel: +966 11 282 8400
E: hbiyari@deloitte.com
This document has been prepared solely for the purpose of publishing in the 2024 ITR World Tax Guide and may not be used for any other purpose. This document and its contents may not be reproduced, redistributed or passed on, directly or indirectly, to any other person in whole or in part without Deloitte’s prior written consent.
Deloitte refers to one or more of Deloitte Touche Tohmatsu Limited (“DTTL”), its global network of member firms, and their related entities (collectively, the “Deloitte organization”). DTTL (also referred to as “Deloitte Global”) and each of its member firms and related entities are legally separate and independent entities, which cannot obligate or bind each other in respect of third parties. DTTL and each DTTL member firm and related entity is liable only for its own acts and omissions, and not those of each other. DTTL does not provide services to clients. Please see www.deloitte.com/about to learn more.
Deloitte provides industry-leading audit and assurance, tax and legal, consulting, financial advisory, and risk advisory services to nearly 90% of the Fortune Global 500® and thousands of private companies. Our people deliver measurable and lasting results that help reinforce public trust in capital markets, enable clients to transform and thrive, and lead the way toward a stronger economy, a more equitable society, and a sustainable world. Building on its 175-plus year history, Deloitte spans more than 150 countries and territories. Learn how Deloitte’s approximately 415,000 people worldwide make an impact that matters at www.deloitte.com.
This communication contains general information only, and none of Deloitte Touche Tohmatsu Limited (“DTTL”), its global network of member firms or their related entities (collectively, the “Deloitte organization”) is, by means of this communication, rendering professional advice or services. Before making any decision or taking any action that may affect your finances or your business, you should consult a qualified professional adviser.
No representations, warranties or undertakings (express or implied) are given as to the accuracy or completeness of the information in this communication, and none of DTTL, its member firms, related entities, employees or agents shall be liable or responsible for any loss or damage whatsoever arising directly or indirectly in connection with any person relying on this communication. DTTL and each of its member firms, and their related entities, are legally separate and independent entities.
© 2023. For information, contact Deloitte Global.
