What is Annual Tax Reconciliation?
Annual tax reconciliation is the year-end process of reconciling book income to taxable income, identifying permanent and temporary differences, and computing the current and deferred tax provisions.
How It Works
- Start with accounting profit before tax.
- Add back non-deductible expenses and subtract non-taxable income (permanent differences).
- Adjust for temporary differences to derive taxable income and current tax.
Saudi Context
Mixed Saudi companies file a Zakat return on Saudi/GCC ownership and a corporate income tax return on foreign ownership. ZATCA’s annual filing deadline is 120 days after fiscal year-end.
Example
A Saudi company books SAR 10 million profit. After adding SAR 500K non-deductible entertainment and deducting SAR 200K tax-exempt dividends, taxable income is SAR 10.3 million.