The executive regulations of the Value Added Tax (VAT) system outline a mechanism for correcting errors and specify its conditions, distinguishing between the type of error and its value. When there is an error in the amount owed to the authority in the tax return, the authority’s right to this amount does not expire due to prescription. However, if the error is in favor of the taxpayer, the authority allows a period of 5 years from the end of the calendar year in which the error occurred for correction; otherwise, the taxpayer’s right to correction and refund will be forfeited. There are two types of errors: either an over-declaration or an under-declaration of the due tax.
Over-declaration of the due tax:
If the tax return results in an increase in the amount of tax payable, such as declaring an increase in output tax or a decrease in input tax, the taxpayer may correct the error in any subsequent tax return within the specified adjustment period.
If the error is SAR 5,000 or less, it can be adjusted in the subsequent tax return. However, if the error exceeds SAR 5,000, the taxpayer may make the necessary correction in the next return by adjusting the tax amounts in the fields corresponding to the ones incorrectly filled, by either reducing the output tax or increasing the input tax.
Under-declaration of the due tax:
If the taxpayer discovers that the tax was declared to the authority in an amount less than the tax due, resulting from under-declaring output tax and overstating input tax, they must notify the authority within twenty days of becoming aware of the error or the incorrect amount declared in their original tax return submitted to the authority. This notification can be made by submitting an electronic correction to the previous return for the period associated with the assessments that have been corrected.