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Chapter - 23
Saudi Arabia

1.    Introduction :

1.1.    Being the major source of government income, revenues represent the cornerstone of the State's budget. The importance of revenues is reflected by the close correlation between revenues and public expenditure. The more revenues the government receives, the more able it becomes to satisfy public demands. On the other hand, this matter depends mainly on the general policy of the State, which may choose to increase its public expenditure at the expense of savings for the future or vice - versa.

1.2.    The welfare of a nation and the ability of a government to meet the needs of development depend mainly on the volume of its revenues compared to the number of the population and the area of the country. This is also related to the policy adopted by the government in directing its expenditure to the various purposes according to pre-determined plans aiming at developing the country and maintaining a high standard of living for its people.

1.3.    Due to the fact that government income sources are always limited contrary to the numerous demands for public expenditure, governments endeavour to deploy their income sources optimally to achieve the planned objectives and satisfy the various needs.

1.4.    In preparing this paper, we have taken into consideration that it abides by the guidelines agreed to by the Research Team of the Fourth ASOSAJ Research Project. We hope that this paper, prepared by the General Auditing Bureau of Saudi Arabia "GAB" and the questionnaire it completed, would contribute to providing information necessary to preparing the final draft of the Research Paper.

2.    Scope and Extent of Government Revenues :

2.1.    The economy of the Kingdom of Saudi Arabia depends mainly on revenues of the oil sector. This is reflected by the percentage of oil production, which in some years amounted to 84% of the Gross Domestic Product. In addition, oil exports represent a high percentage of the Kingdom's exports as they represented 99% in previous years. However, the kingdom has made great strides in minimising dependence on oil and increasing the local product of other sectors like agriculture and industry.

2.2.    Revenues can be classified under two main categories:

First Category: Oil revenues which include oil production revenues and oil income taxes that are imposed on various oil producing companies.

Second Category: Non-oil revenues which include taxes, charges for public services and ZAKAT.

2.3.    Taxes:

2.3.1.    Taxes are also classified under two categories, direct and indirect.

2.3.2.    Direct taxes are of three types:

  1. Non-Oil Corporation Tax: This is charged on the profits of non- Saudi corporations and on the dividends of non-Saudi partners in corporations that comprise both Saudi and non-Saudi partners. This type of tax is a specific one charged at progressive rates.
  2. Capital Investment Tax: This type of tax is charged on the income of capital. It is imposed on both the individual owner of an enterprise and non-Saudi acting partners and it is charged at progressive rates.
  3. Free occupations and artisans Income Tax: This is a direct tax imposed on non-Saudi individuals and it is imposed on special types of income. Moreover, it is a personal tax charged at progressive rates.

2.3.3.    Indirect Taxes are represented in customs taxes which are also called customs duties. These duties are of two types: duties charged on the total sum of the imported goods in a percentage of their prices, and duties charged according to the imported amount. Another type of indirect tax is oil product tax which is charged on the consumption of imported oil products.

2.4.    Charges and Duties:

2.4.1.    These are represented in all charges collected for a service or for selling a good other than oil. These charges and duties include charges for public facilities offered in oil ports and harbours, revenues from commercial registrations, and revenues from airport, communication and post services. These charges also include charges for issuing cars' licences, work permits, residence authorisation cards and passports.

2.5.    Zakat:

2.5.1.    Zakat "almsgiving" is the third pillar of Islam without which an individual could not be a true Moslem. All Moslems believe in the fact that it is a duty to pay Zakat. Although the individual having "Nessab" - the minimum amount of money on which Zakat is payable - is obliged to pay Zakat for himself, Zakat with its social and economic implications is not fruitful and can not optimally achieve its objectives unless the Moslem State bears the burden of collecting and distributing it. The Kingdom of Saudi Arabia is the first Moslem state in contemporary times that practises this third pillar of Islam as an obligation. The Kingdom collects apparent or visible Zakat which is paid on crops, fruits, cattle and sheep. Invisible or hidden Zakat which is paid on money or trade offers used to be left to individuals to pay on their own until the Royal Decree No. 17/28/8634 dated 29/6/1370 H. was issued. According to this Royal Decree, government is responsible for collecting Zakat from Saudi individuals and companies as well.

2.5.2.    The following are some of the main characteristics of Zakat:

(1)    Zakat is paid and collected according to Islamic Law "Shariea": The concept of Zakat is based on established principles of The Holy Qur'an and Sunnah "Sayings and deeds of The Holy Prophet-Mohamed-Peace and Blessings of Allah be Upon Him" The Holy Prophet Mohamed established the guidelines and procedural rules that achieve the concept of Zakat. These guidelines and rules are the basis for Zakat accounting. This was emphasised by the Executive Regulations issued by the Cabinet Resolution No. 392 dated 6/8/1370 H. and the succeeding amendments. The third article of these executive regulations states that Zakat is imposed on capitals and their earnings, all revenues and profits that individuals and companies gain from practising a trade, industry or personal activities, and finally properties and cash belongings of any type. We can classify the above items under three categories:

  1. Movable property like money, trade offers and securities. Zakat is imposed on this property and its revenues at a proportional rate of 2.5%. Cattle and sheep have their own rules.
  2. Real property like farming lands, their crops, fruits and immovable property like real estate and factories. Zakat on crops and fruits ranges from 5% to 10% according to the effort exerted in farming. Zakat on immovable property is 2.5%.
  3. Income earned from free professions and handcrafts. Zakat is imposed on the net income at a rate of 2.5%.

(2)    A system applied on Saudi citizens and companies and likewise: Zakat Law in the Kingdom is only applicable to Saudi citizens and companies. Gulf States' citizens and companies are also subject to Zakat Law as far as they live or work in Saudi Arabia.

(3)    A system applying non-financial sanctions and penalties: Zakat as an Islamic duty or ritual imposed by God should be paid fully and honestly by the Moslem without being asked to do. That is why Zakat Law does not include penalties and fines to be imposed on evaders. They are not allowed to travel abroad or transfer their monies out of the country. The debt of Zakat is given a priority over any other debts.

3.    Objectives and Scope of Government Revenue Audit:

3.1.    The objective of audit is to ensure that all State's revenues and due rights in cash or kind or services have been appropriately collected and entered into the relevant books in accordance with the prevailing rules and regulations. In addition, GAB reviews and assesses internal control systems of the auditees and recommends the necessary actions to be taken to rectify the shortcomings the review process has pointed out. GAB also follows-up the implementation of its recommendations and offers assistance and guidance to the auditees to develop efficient internal control systems. Paragraph "d" in Clause "136" of the Comprehensive Auditing Standards issued by GAB requires studying the relevant public laws, by­laws, rules and regulations to determine the extent of compliance therewith, and evaluating the relevant internal control systems to determine the nature, scope and timing of tests and procedures required to realise the auditing objectives. The last part of paragraph "2" in Article "8" of the Articles of Association of GAB states that GAB is required to provide assurance that the auditees possess the ability to preserve the integrity and proper deployment of the State's current and fixed assets to remain immune from abuse or deployment to achieve other than the designated objectives. Moreover, Article "15" states the following:

3.2.    "The following shall be deemed as financial irregularities:

  1. Any action that contravenes any of the provisions of the GAB's Articles of Association or the relevant executive regulations.
  2. Any action that contravenes any of the provisions contained in the laws of the country pertaining to the proper maintenance and integrity of the State's current and fixed assets. This includes as well whatever might contravenes the State's financial systems such as the provisions of the State's budget, financial and accounting standards or the warehouses' regulations.
  3. Every act of negligence or remiss that might lead to the loss of any of the State's financial rights or might expose any of the State's financial interests to risk or create circumstantial implications that might possibly contain an inherent element of risk".

4.    Audit Mandate :

4.1.    According to Article "7" of its Articles of Association, GAB is responsible for the execution of comprehensive post-auditing on the State's revenues, expenditures, current and fixed assets, and for exercising auditing control to ensure proper utilisation and maintenance of these resources.

4.2.    Article "8" also states the following: "GAB shall prepare the relevant executive regulations and shall obtain the approval of the Prime Minister and arrange to identify the organs capable of achieving the following objectives:

  1. To provide assurance that all State's revenues and due amounts in cash or kind or services have been appropriately collected and entered into books according to the prevailing regulations, and that expenditures have been consumed in accordance with the provisions contained in the annual budget and the prevailing financial, administrative and accounting standards and regulations.
  2. To provide assurance that the State's current and fixed assets are being employed to achieve the objectives of their allocation.
  3. To ensure that GAB's respective auditees consistently and comprehensively realise the application of their internal financial and accounting regulations, and that their financial behaviour is devoid of actions that contravene the said internal financial and accounting regulations.
  4. To establish a follow-up strategy to ensure the competency and viability of the financial and accounting rules and regulations in force and their potency to cope with any possible managerial developments that might take place in the Kingdom, and to identify areas of inadequacies together with the relevant proposals for modification or to the extremity of that to propose substitute rules and regulations"

4.3.    Moreover, Article "10" states that GAB's auditees are required to provide the accounting data and any other documents to enable GAB execute its auditing tasks described and contained in its Articles of Association, and to extend every possible assistance and facility to GAB's designated auditors and inspectors in line with the relevant requirements laid down in the executive regulations.

4.4.    Article "7" of the Executive Regulations of GAB states that the President of GAB is empowered to determine the place for checking, auditing and inspection of the auditees' accounts either at GAB's or auditees' premises according to GAB's ability and the public interest requirements. Article "9" of the same regulation necessitates the following: "Ministries and government departments shall submit to the Bureau the monthly statements contained in the financial directives within a period not to exceed fifteen days from the closing date of the relevant accounts. As for the account statements for the last month of the fiscal year, the date of submission shall be specified in the closure of accounts' circular issued by the Ministry of Finance and National Economy at the end of each fiscal year with prior consultation with GAB".

5.    Audit Procedures and Methodologies in Revenue Audit:

5.1.    GAB adopts the following procedures and methodologies in revenue audit:

  1. Conducting External Audit: GAB is a fully independent institution. It is not affiliated to the executive branch, but it has a direct line of reporting to His Majesty the Custodian of the Two Holy Mosques, the Prime Minister. It conducts external audits to realise an effective control over the State's public monies and resources.
  2. Conducting Post-Auditing: According to Article "7" of the Articles of Association, GAB is responsible for the execution of comprehensive post-auditing on the State's revenues.
  3. Audit Methodology: In the execution of its audit assignments, GAB applies "sampling" techniques selected on percentage basis and according to scientific principles and established statistical methods, as might be required in the light of the operational needs and experience in respect of each category of documents and operations being audited by GAB.
  4. Place of Auditing: GAB carries out its audits either at its premises (the head office and other branches) or at the auditee premises.
  5. Reporting Audit Findings: GAB reports its audit findings in the form of a comprehensive report to the auditees having no branches, or in separate reports to multi-branch auditees so as to make it easier for them to respond to GAB's audit findings.
  6. Audit Planning :
  7. GAB, as a supreme audit institution, is interested in planning its audits and applying audit standards that optimise utilisation of audit resources and minimise audit risks. Effective audit planning aims at ensuring the optimum collection of government revenues in accordance with the prevailing audit standards, and that objective is diligently sought by GAB through the following:
  8. Ensuring that revenue collection is carried out in accordance with the prevailing rules, regulations and instructions, and after the approval of the State's budget (Legal Standard).
  9. Ensuring that all transactions related to revenues are executed on the strength of proper documents and data, and that all these transactions are entered into the relevant books (Accounting Standard).
  10. Planning the audit and defining its scope and extent for revenue operations only and not for audit work in general.
  11. Evaluating programs and work done, and analysing the results to find out the extent to which the objectives are realised (Performance Measuring Standard).

6.2.    In the light of these analyses, GAB plans its audits as follows:

  1. Laying down annual plans and quarterly work programs and progress reports using computer systems so as to make it easier to control productivity.
  2. Defining the volume of work to be done by the audit team according to samples taken out of documents, the files of Zakat or tax payers, or customs data.
  3. Evaluating the sufficiency and efficiency of internal control systems at the auditees. The more reliable the internal control systems are, the less volume of audit work the external auditor needs to do, and vice versa.
  4. Using computer systems in indexing and classifying rules and regulations to make it easier for the auditor to refer to the regulating tool smoothly.

7.    Audit Reports:

* Comment Reports: They are the reports that include audit findings. They are prepared and sent to the auditees after reviewing and checking the State's public revenues in the respective departments, and after considering the matters that require an advisory opinion by GAB's advisers. These reports are approved by the different supervisory levels according to their mandates specified by the President of GAB. As far as irregularities are concerned, they should not be reported to the Control and Investigation Board unless they are referred to GAB's President who agrees to reporting the violations to the Board to initiate its investigations. According to Article 11 of GAB's Articles of Association, auditees should consider the audit findings and inform GAB of the steps they have taken to carry out GAB's recommendations. In case of failure by an auditee to reply, GAB takes the following procedures:

  1. Sending a follow-up reminder if the auditee did not reply within 40 days from the date of receiving the audit report.
  2. Sending a second follow-up reminder 30 days after the first one.
  3. Sending a third follow-up reminder 30 days after the second one. If the auditee fails to reply 30 days after the third reminder, the whole matter is referred to GAB's President to decide whatever action is necessary for the situation.

* Annual Report: The annual report is prepared by the Reports Office which is affiliated directly to the President's office. The annual report is submitted to His Majesty the Custodian of the Two Holy Mosques at the end of each fiscal year, with two copies, one sent to the Cabinet and the other to the Ministry of Finance and National Economy. This report includes an evaluation of the State's financial management and the financial management at all entities subject to GAB's auditing. The annual report also includes a statement of the final account for the related fiscal year and a brief account of GAB's work all through the year.

8.    Information Technology Audit Techniques :

8.1.    Due to the fact that computers have become a necessity, SAIs had to modify their audit methodologies to cope with the new technological changes and apply them in the field of auditing and accounting. Having realised the importance of using that new technology and aiming at improving the efficiency of the audit process, GAB has established an Information Center with the objective of developing an accurate automated system equipped with the necessary computer facilities and trained expertise to provide the information and data that could be of use in advancing GAB's work in the field of auditing. GAB uses computer systems in the following:

  1. Reviewing and evaluating applied computer systems, their operation and maintenance to ensure the availability of sufficient controls.
  2. Ensuring whether the systems are realising the following objectives:
  1. Ensuring the reliability of data.
  2. Ensuring the reliability of these systems in relation to auditing and whether there are controls governing this matter.
  3. Securing controls over inputs which include:

9.1.    Firstly: System of upgrading the skills and expertise of revenue audit personnel:

9.1.1.    The Administrative Development Department is responsible for developing manpower and anything that could improve performance and support the effectiveness of administration at GAB. To carry out this responsibility, the Administrative Development Department is assigned the following tasks:

9.1.2.    To upgrade the skills and abilities of GAB's personnel, the Administrative Development Department offers continuous training opportunities through holding in-door training courses in collaboration with the Audit Technical Assistance Team or sending the trainees to the Institute of Public Administration to participate in general training programs and workshops. Trainees are also sent to specialised academic institutions whether inside the Kingdom like the Saudi Accountants Association or the British Council to study the English language, or abroad to benefit from the training opportunities offered by the various universities and international and regional audit institutions.

9.1.3.    Training is offered to all job levels starting from the newly appointed auditor to the higher levels. Training comprises the theoretical and the practical aspects so as to enhance professional and production competence of GAB's personnel according to the most up-to-date audit training techniques.

9.2.    Secondly: Cost of revenue audit vis-a-vis revenue realised:

9.2.1.    Based on work interests that require intensifying GAB's efforts in the field of State's revenue audit, GAB established in 1411 H. (corresponding to 1990) the General Department of Revenue Auditing that has the following sub-departments:

9.2.2.    The following table shows the number of staff of the General Department of Revenue Auditing and the cost of revenue audit vis-a-vis revenue realised:

Number
of Staff		 Cost of revenue
audit 1415/1416H		 Revenues collected
1415/1416H		 Percentage
31 2,600,652 SR 23,236,473 SR 11.19

10.    Basic Laws of Taxation :

10.1.    Broad lines of the Saudi Tax System are:

10.1.1.    The Saudi Income Tax Law was issued for the first time by the Royal Decree No. 17/2/28/3321 on 21/1/1374 H. and it has been subjected to many amendments, the latest of which was incorporated by the Royal Decree No. M/19 on 1/7/1390 H. which was followed by the Royal Decree No. M/37 on 4/5/1395 H. relating to cancelling tax on personal income. This law comprises three types of taxes:

  1. Tax on the total income earned by non-Saudi individuals other than their personal income. It also goes for the income they earn from investing their capital.
  2. Tax on the profits gained by non-Saudi companies that practise their activities only inside the Kingdom or inside and outside at the same time.
  3. Tax on the profits gained by non-Saudi individuals from companies that comprise both Saudi and non-Saudi individuals.

10.2.    From the above three types of taxes we notice the following:-

10.3.    Associations of capital that comprise Saudi and Non-Saudi capital have a special status. Saudi capital profits are subject to Zakat, while non-Saudi capital profits are subject to corporate tax. As for foreign partnerships that comprise non-Saudis, they are dealt with in the same way as individuals according to the provisions of Article three of the Income Tax Law, and they are subject to capital investment tax. In general, nationality plays an important role in being subject to income tax or not. That's why nationality should be defined first. If the tax payer is a Saudi, he is subject to Zakat; otherwise, he is subject to income tax. This principle should not be violated and any tax assessment made contrarily is considered null and void. There are many Royal Decrees that state dealing with Gulf States' citizens in the same way as Saudi nationals.

11.    Landmark Judgements :

  1. Assessment According to Appearances: In this case appearances are used as a basis for tax assessment. For example, housing rent, the number of employees and the number of cars an individual owns are appearances that could be easily noticed and at the same time be considered as indications of the income the individual gains. In this way, tax is assessed on a hypothetical income and not the actual income. This way is characterised by easy application as it takes, nothing but noticing the external appearances and transactions. The point against this is that the assessment could be away from reality as you could not take notice of the income that has no external appearances like salaries, debt interests, deposits and insurance. Although this way of assessment has been abandoned, it is still used in some cases as an audit tool to verify the exactness of tax returns by comparing such appearances with the amounts of income mentioned by tax payers.
  2. Random Assessment: In this case, assessment is made randomly using evidences related to the material subject to taxation. This way is usually used when the tax payer fails to present his tax return or when he is not able to do so because there are no regular accounting books to show the real basis of assessment. The indications and evidences could be prescribed by law. In this case, Tax Administration only applies the law by using indications like assessing commercial profits on the basis of a certain percentage of the business volume, figuring out the income of a doctor according to his work hours, assessing farming production on the basis of the land rent, etc. This is called legal random assessment. The basis of tax assessment reached by an agreement between a tax payer and the Administration is called consensual random assessment. This way is inadequate because it is not fair, as a total figure might be taken while in most cases it could be bigger than the real taxable amount. However, the tax payer has a legal right to present evidence proving errors in assessment.
  3. Assessment According to Tax Returns: In this way, the tax payer is required to present a tax return concerning his activities during the defined period of accounting as shown in his books and documents. This method is based on the fact that the tax payer is the only person who can assess his income on a realistic basis. However, the Law gives Tax Administration, in cases of doubting the accuracy of tax returns, the right to review and check tax returns against any documents made available to it to avoid any attempts at evasion. If a tax return proves to be accurate, it is used as a basis for assessment. If it shows inaccurate data or the Administration has a different view from the tax payer concerning some of the accounting items, the Administration has the right to modify the tax return or refuse it entirely if the books kept by the tax payer prove to be irregular. The Administration then may resort to random assessment and impose sanctions in cases of misleading tax returns aimed at tax evasion. On the other hand, the tax payer has the right to protest or complain against these sanctions before judiciary commissions.

* Exchange rate for different currencies vis-a-vis the US $ as on 31st March, 1997 are indicated in Appendix 1 (Pg. 475)

11.1.    This way of assessment according to tax returns is considered to be the best method if the tax payer is sincere and of absolute integrity.

(a)    Assessment According to a Third Party Statement: In this case, Tax Administration asks a third party, other than the tax payer, to present a statement defining the income the tax payer earns. For example, the employer may be asked to present a statement concerning the salaries and wages he pays for his employees, a company may also be asked to define the profits gained by its shareholders, and individuals may be asked to present a statement concerning the rents they pay to a landlord. The statement obtained from a third party is used in auditing the tax return presented by the tax payer.

12.    Fiscal Reforms :

12.1.    Oil revenues represent a high percentage of public revenues. This necessitates diversifying revenue sources as it is a risk to depend only on one source, and this is due to the following facts:

12.2.    Therefore, there has been a need for increasing revenues other than oil revenues like taxes, dues and borrowings. These resources could be controlled, unlike oil which is affected by external factors. These revenues could be increased by the following:

  1. Imposing customs duties on some of the luxurious goods that were free of any charge in spite of the rise in their import marginal inclination.
  2. Imposing customs taxes at progressive rates on luxurious goods and exempting tax goods and medium products.
  3. Decreasing tax evasion by spreading tax awareness, avoiding, if possible, random tax assessment, and increasing sanctions on evasion attempts.
  4. Increasing present charges on some services, and imposing new ones on services that are free of charge now.
  5. Supporting non-oil exports with the aim of increasing them.

13.    Tax Expenditures :

13.1.    Tax exemptions: Originally speaking, taxes are imposed on the income that fulfil the requirements of being subject to taxation. However, there are many exceptions like cases of permanent or temporary exemptions. If these exemptions are to be applied, they should be clearly stated either in the Tax Law itself or through special texts issued in this concern.

13.2.    Article 17 of the Tax Law and Article 14 of its Executive Regulations state some exemptions. There are also decrees and decisions concerning some cases of exemption. The following are examples of exemption cases:

  1. Charitable associations, organisations and institutions recognised by the government.
  2. The minimum amount of income necessary for living and satisfying family and social needs.
  3. Non-Saudis' shares in investment projects.
  4. Non-Saudis' shares in capital increasing processes for joint ventures in the Kingdom.
  5. Exemptions on the strength of bilateral and international double taxation agreements.

14.    Tariff Classification and Valuation in Commodity Taxation :

14.1.    GAB, in its capacity as a supreme audit institution, audits the State's revenues to ensure that these revenues, whether they are monies in cash or kind or services, have been appropriately collected in accordance with the prevailing rules and procedures. These revenues include charges on imported commodities, known as "customs duties".

14.2.    The Kingdom of Saudi Arabia - represented by Customs Administration, has issued regulations for customs tariff including lists for all goods that are internationally traded and which are imported by the Kingdom. The Kingdom does not impose any taxes on exports. That is why the tariff classification includes only the imported goods. GAB, as a supreme audit institution, studies the tariff system, the classification and evaluation of imported goods, the charges imposed on these goods and compliance with the related rules, regulations and circulars, some of which are the following.

  1. Customs law and its executive regulations.
  2. Cabinet resolutions relating to charges and exemptions.
  3. Resolutions and circulars of the Ministry of Finance and National Economy and Customs Administration that are related to charges and dues.
  4. Customs Tax Exempted Companies and Factories Guide.
  5. Agreements between the kingdom and other Arab, Muslim or foreign states.
  6. Resolutions of the Committee of Tariff and Customs Studies. 14.3 GAB ensures the following during the reviews it carries out:

14.3.    Item and itemisation: when reviewing the compliance of import statement with the tariff, GAB seeks to ensure that goods are charged with the right or appropriate dues.

  1. That storage dues are collected in full and differences, if any, are defined.
  2. That valuation of goods is done according to their delivery conditions.
  3. That there are not any goods inappropriately charged.
  4. The appropriateness of the permissible discount.
  5. The amount of goods to be exempted.
  6. There is not a decrease in the added insurance which leads to a decrease in the charges of customs.
  7. There are not errors in the rates of exchange to Saudi Rial.
  8. Charging all in-coming invoices.
  9. Charging and estimating all in-coming samples.

14.4.    GAB also ensures that all objectives of customs policy are achieved and that the tariff system serves these objectives and aims at the following:

15.    Accountability:

15.1.    Accountability means to be obliged to bear the responsibility of the tasks assigned to us and that have an effect on others. Responsibility is to oblige ourselves to carry out tasks we have the ability to carry out in the light of some practical standards. If we failed to carry these tasks out, we would be asked to answer for that. In the light of accountability reports, individuals' performance is evaluated and the tasks they are accountable for are defined.

15.2.    Accountability should not be confused with auditing because accountability precedes auditing and they are not interchangeable. The auditing target is the objective and systematic evaluation of management reports and the extent to which objectives are achieved, while accountability aims at providing the necessary information needed by the managing body to evaluate performance and management systems. Thus, auditing supports accountability to a great extent. Based on this, GAB, as a supreme audit institution, emphasises the concept of accountability. Article 12 of the Articles of Association of GAB states the following:

15.2.1.    "Unless it has been established that a particular and a named person is held responsible, it is assumed that the Director of Finance or whoever deputises for him shall be held responsible for the irregularities cited below:-

  1. Any violation or infringement of the provisions contained in Article 11.
  2. Any failure or delay to forward the required data and periodical reports to GAB within the pre-determined time limit ".

15.3.    Article 16 also states the following:-

15.3.1.    "Depending on the degree of importance of the detected irregularity, GAB shall exercise the right to demand from the concerned auditee to summon the employee accountable for the irregularity and to conduct the necessary investigation thereafter to determine the suitable managerial penalty. Alternatively, GAB shall sue the said officer to appear before (the concerned disciplinary body)".

15.4.    Article 7 of GAB's regulations for corporations and companies in which the State contributes in the capital share or guarantees a minimum profit states the following:

15.4.1.    "The President of GAB shall exercise the right to demand from the concerned authorities to execute the. necessary investigations and impose the relevant penalties on every individual who has deliberately concealed information to impede GAB from accomplishing the functional tasks referred to in these regulations or has committed a financial irregularity by which he violated the established regulations and standards referred to in the especially designed internal systems or regulations of the private enterprises and companies subject to GAB's auditing control, and which could result in a change of the financial position of any particular private enterprise or company".

15.5.    GAB requires its auditors to write objective reports and to include only actual findings 'observing the prevailing rules and regulations. Through these reports, the accountability of the officials of the auditees is defined.

16.    Collection and Accounting :

16.1.    Zakat and Income Tax Administration is the entity responsible for collecting taxes payable by non-Saudi individuals and companies. The various branches of the Administration collect taxes from individuals of professions and crafts who are not citizens of Gulf states. Citizens of Gulf states are treated as Saudi citizens who pay Zakat according to Islamic Law"Shariea".

16.2.    Taxes are collected when they become due according to the following:

  1. Tax payers are obliged to pay their taxes according to tax returns within 15 days that follow a whole year spent in the Kingdom. This is for individuals, while companies are obliged to submit their tax returns and pay their taxes within the first 15 days of the third month following the year subject to taxation. A period of 5 days is offered as grace. The general director of the Administration is entitled to offer periods of grace not to exceed 6 months provided that the company submits an application for grace showing the reasons for this request. In all cases, the company has to pay an amount on account before the deadline. This amount should be equal to the assessed tax supported by a brief statement of the company's accounts. Companies always ask for grace in order to be able to prepare and submit detailed accounts. If these detailed accounts are submitted after the grace period and show that there is a due tax of more than 10% of the amount already paid, the company is charged a delay penalty on the difference exceeding that amount.
  2. If a tax payer agrees to the assessment after reviewing his tax return, he has to pay the difference amount as soon as he receives a note of the assessment. If he objects to this assessment before the deadline, then the tax is not due until the first instance protest committee reaches a resolution. In all cases, due taxes could be paid by instalments.
  3. Entities that have transactions with a tax payer should withhold the last payment under his contract until he submits a certificate from Tax and Income Tax Administration stating that he has already paid his tax dues according to Law.

16.3.    Methods of Tax Payment:

  1. In respect of income tax of individuals, the Law states that persons of free professions and craftsmen are committed personally to pay their income taxes according to their tax returns. This also applies to income earned from capital investment.
  2. As for corporate tax, companies are required to pay their taxes to the officer in charge in Tax Administration.
  3. Withholding Tax Duties at Source: Contractors were obliged to deduct tax amounts from payments they receive. Currently, only the last payment is withheld until the contractor submits an evidence showing that he has already paid his tax dues.

16.4.    Paying Tax by Instalments:

16.4.1.    Based on a proposal submitted by the Minister of Finance and National Economy, the Cabinet approved tax payment by instalments. The Minister has the authority to define the instalments or penalties due, and to authorise the General Director of Tax Administration to practise that authority. Zakat and Income Tax Administration has issued the relevant regulations.

16.5.    Tax Payment Delay:

16.5.1.    Tax law states that if a taxpayer fails to pay tax according to his tax return within 15 days, after the deadline, he should pay a fine of 10% of the tax. If the delay exceeds 15 days, he should pay a fine of 25%. As for companies, they pay 10% as a fine if they pay their taxes within 5 days after the deadline. If the delay exceeds 15 days, they should pay a fine of 25%.

16.5.2.    A taxpayer has only to pay his taxes before the deadline in order to avoid any penalties. As for tax evading fines, they are imposed when a taxpayer conceals intentionally data concerning his income that might affect his tax assessment or when he gives false data. This kind of fine is in addition to delay fine.

16.6.    Paying Tax in Excess:

16.6.1.    It might happen that a taxpayer pays the tax according to the last assessment but he protests against this assessment within the permissible time and the protest committee finds that his tax dues are less than what he has already paid. The taxpayer may also pay taxes for a contract or activity that is originally exempted. In all these cases, the taxpayer has the right to get back the money he has paid in excess. This is done by submitting an application within 30 days after the date of assessment; otherwise, he loses this right.

Principal Organisational Chart
of the Saudi Customs Administration & Branches