What is Advance Tax Payment?
An advance tax payment is an instalment that a corporate income taxpayer makes to ZATCA during the tax year, ahead of filing the annual return. The total instalments are credited against the final tax liability calculated at year end.
How It Works
- Compute the prior-year final tax liability as the reference point.
- Determine the number of advance instalments required by ZATCA for the taxpayer’s profile.
- Pay each instalment by its statutory due date through the ZATCA portal.
- Record each payment as a tax prepayment in the books.
- Reconcile total advance payments against the final tax liability and pay or recover the difference.
Saudi Context
Resident corporate income taxpayers in Saudi Arabia whose previous-year tax was at or above SAR 2 million pay three advance instalments during the year. Penalties apply for late or missed advance payments under the Income Tax Law.
Example
A foreign-owned company in Saudi Arabia had a SAR 9 million income tax liability last year. It must pay three advance instalments of 25% each — SAR 2.25M each — and settle the balance at year end.