1. Corporate Registration and Licensing
All entities must maintain a valid Commercial Registration (CR) issued by the Ministry of Commerce. Depending on the nature of activities, additional approvals and sector-specific licenses may be required.
Core obligations include:
Active Commercial Registration
Updated Articles of Association
Municipal (Baladiya) license
Chamber of Commerce registration
Disclosure of Ultimate Beneficial Owners (UBO)
Failure to maintain valid registration can lead to fines, service suspension, and restrictions on government portals.
2. Tax Compliance Framework
Tax matters in the Kingdom are regulated by the Zakat, Tax and Customs Authority (ZATCA). Businesses must assess their tax profile carefully to ensure proper reporting and payment.
Zakat
Applicable to Saudi and GCC shareholders, generally calculated at 2.5% of the Zakat base.
Corporate Income Tax
Applicable to non-Saudi ownership at 20% on taxable profits.
Value Added Tax (VAT)
VAT is imposed at 15%, and compliance includes:
Mandatory registration (threshold: SAR 375,000)
Monthly or quarterly VAT return filing
Proper tax invoice issuance
Input VAT documentation
Record retention (minimum six years)
Withholding Tax (WHT)
WHT applies to payments made to non-residents, including royalties, technical services, management fees, dividends, and interest. Rates range between 5% and 20%, subject to Double Tax Treaties.
Incorrect classification or late filing may result in penalties and suspension of tax certificates.
3. E-Invoicing (FATOORA) Compliance
ZATCA’s FATOORA system was introduced to digitize invoicing processes and enhance transparency.
Phase 1 – Generation Phase
Mandatory electronic invoice generation
QR codes for simplified invoices
Prohibition of handwritten invoices
Phase 2 – Integration Phase
System integration with ZATCA
Real-time invoice clearance for standard invoices
Reporting of simplified invoices
Businesses must ensure their accounting or ERP systems are fully compliant and properly integrated.
4. Labor and Payroll Compliance
Employment matters are governed by the Ministry of Human Resources and Social Development.
Key compliance areas include:
Proper employment contracts
Wage Protection System (WPS) reporting
GOSI registration and monthly contributions
End-of-service benefit calculations
Saudization (Nitaqat) requirements
Non-compliance may lead to fines, visa restrictions, and labor disputes.
5. Governance and Financial Reporting
Companies are required to maintain accurate accounting records and, where applicable, audited financial statements. Proper governance includes:
Documented board resolutions
Maintenance of statutory records
UBO disclosure
Timely renewal of licenses
Strong governance structures enhance transparency and reduce regulatory exposure.
6. Anti-Money Laundering (AML) Obligations
Certain sectors, including financial services and professional firms, are subject to AML regulations supervised by authorities such as the Saudi Central Bank and other regulators.
Obligations may include:
Customer Due Diligence (CDD)
Suspicious transaction reporting
Internal AML policies and training
Risk-based compliance frameworks
Failure to implement AML controls can result in significant financial and legal consequences.
Why Proactive Compliance Matters
Regulatory authorities in the Kingdom are increasingly interconnected, and digital monitoring systems allow cross-verification between tax, labor, and commercial platforms. A reactive approach to compliance is no longer sufficient.
Best practice includes:
Maintaining a compliance calendar
Conducting periodic tax and payroll health checks
Reviewing contracts for WHT exposure
Ensuring ERP system alignment with regulatory requirements
Seeking advisory support for complex transactions
Final Thoughts
Business compliance in Saudi Arabia is structured, technology-driven, and continuously evolving. Companies that embed compliance into their operational framework not only mitigate risk but also enhance credibility with regulators, investors, and stakeholders.
In today’s regulatory environment, compliance is not merely an administrative function—it is a strategic pillar of sustainable growth.
All entities must maintain a valid Commercial Registration (CR) issued by the Ministry of Commerce. Depending on the nature of activities, additional approvals and sector-specific licenses may be required.
Core obligations include:
Active Commercial Registration
Updated Articles of Association
Municipal (Baladiya) license
Chamber of Commerce registration
Disclosure of Ultimate Beneficial Owners (UBO)
Failure to maintain valid registration can lead to fines, service suspension, and restrictions on government portals.
2. Tax Compliance Framework
Tax matters in the Kingdom are regulated by the Zakat, Tax and Customs Authority (ZATCA). Businesses must assess their tax profile carefully to ensure proper reporting and payment.
Zakat
Applicable to Saudi and GCC shareholders, generally calculated at 2.5% of the Zakat base.
Corporate Income Tax
Applicable to non-Saudi ownership at 20% on taxable profits.
Value Added Tax (VAT)
VAT is imposed at 15%, and compliance includes:
Mandatory registration (threshold: SAR 375,000)
Monthly or quarterly VAT return filing
Proper tax invoice issuance
Input VAT documentation
Record retention (minimum six years)
Withholding Tax (WHT)
WHT applies to payments made to non-residents, including royalties, technical services, management fees, dividends, and interest. Rates range between 5% and 20%, subject to Double Tax Treaties.
Incorrect classification or late filing may result in penalties and suspension of tax certificates.
3. E-Invoicing (FATOORA) Compliance
ZATCA’s FATOORA system was introduced to digitize invoicing processes and enhance transparency.
Phase 1 – Generation Phase
Mandatory electronic invoice generation
QR codes for simplified invoices
Prohibition of handwritten invoices
Phase 2 – Integration Phase
System integration with ZATCA
Real-time invoice clearance for standard invoices
Reporting of simplified invoices
Businesses must ensure their accounting or ERP systems are fully compliant and properly integrated.
4. Labor and Payroll Compliance
Employment matters are governed by the Ministry of Human Resources and Social Development.
Key compliance areas include:
Proper employment contracts
Wage Protection System (WPS) reporting
GOSI registration and monthly contributions
End-of-service benefit calculations
Saudization (Nitaqat) requirements
Non-compliance may lead to fines, visa restrictions, and labor disputes.
5. Governance and Financial Reporting
Companies are required to maintain accurate accounting records and, where applicable, audited financial statements. Proper governance includes:
Documented board resolutions
Maintenance of statutory records
UBO disclosure
Timely renewal of licenses
Strong governance structures enhance transparency and reduce regulatory exposure.
6. Anti-Money Laundering (AML) Obligations
Certain sectors, including financial services and professional firms, are subject to AML regulations supervised by authorities such as the Saudi Central Bank and other regulators.
Obligations may include:
Customer Due Diligence (CDD)
Suspicious transaction reporting
Internal AML policies and training
Risk-based compliance frameworks
Failure to implement AML controls can result in significant financial and legal consequences.
Why Proactive Compliance Matters
Regulatory authorities in the Kingdom are increasingly interconnected, and digital monitoring systems allow cross-verification between tax, labor, and commercial platforms. A reactive approach to compliance is no longer sufficient.
Best practice includes:
Maintaining a compliance calendar
Conducting periodic tax and payroll health checks
Reviewing contracts for WHT exposure
Ensuring ERP system alignment with regulatory requirements
Seeking advisory support for complex transactions
Final Thoughts
Business compliance in Saudi Arabia is structured, technology-driven, and continuously evolving. Companies that embed compliance into their operational framework not only mitigate risk but also enhance credibility with regulators, investors, and stakeholders.
In today’s regulatory environment, compliance is not merely an administrative function—it is a strategic pillar of sustainable growth.