Expanding or operating in Saudi Arabia offers tremendous opportunities, but compliance remains one of the biggest challenges for businesses. Despite clear regulations under ZATCA, GOSI, MHRSD, and MOCI, many companies—especially SMEs—make recurring mistakes that can lead to penalties, reputational risk, and even business suspension.
Here are some of the most common compliance mistakes we observe:
1. VAT Non-Compliance
- Incorrect classification of supplies (standard-rated, zero-rated, exempt).
- Delay in VAT return filings or incorrect input VAT claims.
- Not reconciling VAT with financial statements and ZATCA portal.
2. Withholding Tax (WHT) Errors
- Misunderstanding WHT applicability on cross-border payments.
- Incorrect rate application due to ignoring Double Taxation Avoidance Treaties (DTAA).
- Non-reporting or late payment of WHT.
3. GOSI & Payroll Issues
- Incorrect employee classification (Saudi vs. expat).
- Errors in wage protection system (WPS) submissions.
- Missing updates for new hires, terminations, or salary revisions.
4. Corporate Income Tax & Zakat
- Incorrect segregation of Zakat vs. Tax base.
- Not maintaining proper supporting documents for expenses.
- Errors in related-party transactions and transfer pricing documentation.
5. Regulatory & Licensing Gaps
- CR (Commercial Registration) not renewed on time.
- Non-updation of licenses with MOCI and municipality.
- Missing UBO (Ultimate Beneficial Owner) disclosures.
6. Poor Documentation & Record Keeping
- Not maintaining e-invoicing compliance as per Phase 2 requirements.
- Missing contracts and supporting documents for expenses.
- Lack of internal audit and control mechanisms.
The Way Forward
Compliance is not just about avoiding penalties; it’s about building trust with regulators, investors, and partners. One practical approach many businesses are adopting is to engage a Virtual CFO. Unlike a regular accountant who focuses mainly on bookkeeping, a Virtual CFO brings a 360° view of Saudi laws and regulations (VAT, Zakat, GOSI, WHT, corporate tax, licensing). This ensures businesses stay proactive, not reactive.
Having a Virtual CFO on board not only reduces the risk of errors but also provides strategic financial oversight, which helps management focus on growth while staying compliant.
