Tax Evasion

Tax evasion is any deliberate act aimed at not paying tax that is due, reducing it or obtaining a refund that is not due, such as submitting forged, fabricated or false documents, returns or records, or concealing a taxable activity. It differs from legitimate tax planning, which uses options the law allows with full disclosure: evasion rests on deception and concealment. In Saudi Arabia each tax law defines evasion and its penalty. The VAT Law treats submitting false, forged or fabricated documents, returns or records with intent to evade as evasion, places the burden of proving lack of intent on the taxpayer, and punishes it with a fine of not less than the tax due and not more than three times the value of the goods or services concerned. The Real Estate Transaction Tax Law punishes evasion with a fine of up to three times the tax evaded; this includes declaring an incorrect transaction value and wrongfully exploiting exemptions, and it extends to anyone who participates or assists. The Income Tax Law imposes a fine of 25% of the tax difference resulting from false information or fraud with intent to evade, on top of late-payment fines. In real estate, certain patterns recur: recording a lower sale price than the real one to reduce Real Estate Transaction Tax, classifying shops or hotel apartments as residential to escape VAT, collecting commercial rent without invoicing or registering, and submitting false documents to obtain an exemption. ZATCA may recalculate tax on fair market value, the assessment period is extended in evasion cases, and ZATCA pays informants a reward of up to 2.5% of the amounts and fines collected, capped at SAR 1,000,000.