Saudi CIT Advance Payments: Formula, Threshold and Relief

Advances are a separate payment obligation

Income Tax Law Article 70 requires qualifying taxpayers earning revenue in the tax year to make three payments on account. The dates are on or before the last day of the sixth, ninth and twelfth months of that tax year. The ordinary 120-day annual settlement does not replace these earlier dates.

Regulations Article 64 elaborates the calculation, reduction process and collection consequences. The starting question is whether the taxpayer meets the actual statutory conditions, including the per-payment threshold. It is too broad to say that every Saudi CIT taxpayer always makes three advances merely because it operates a business.

Use the taxpayer’s own prior-year withholding

Article 70(a) defines each payment as 25% × (A − B). A is the taxpayer’s prior-year tax according to its return. B is the tax paid through withholding at source in the prior year under Article 68. Regulations Article 64(1)(b) clarifies that this is withholding from the taxpayer’s own activity.

It is not all withholding the company remitted for suppliers, its current-year withholding ledger or an accounting tax expense. The deduction of B occurs inside the brackets. Computing 25% of A and then subtracting the whole of B can materially understate the payment.

The SAR 500,000 threshold applies to each formula result

Article 70(b) provides that advances are not required where the formula result does not reach SAR 500,000. Exactly SAR 500,000 reaches the threshold. The test is the individual calculated instalment, rather than the aggregate of all three or the prior year’s gross tax figure by itself.

Dariba illustration: if A is SAR 3 million and B is SAR 200,000, A minus B is SAR 2.8 million and each payment is SAR 700,000. Three payments total SAR 2.1 million. This is an original illustration under the ordinary rule. The business must still establish the current-year revenue condition and any particular arrangement that applies.

A below-threshold result does not remove annual tax

With A of SAR 2 million and B of SAR 200,000, each formula result would be SAR 450,000. That is below the statutory threshold, so the ordinary advance obligation under this provision does not arise on those assumptions. It does not follow that the company owes no income tax for the current year.

For comparison, A of SAR 2 million and B of nil produces exactly SAR 500,000 per payment. These Dariba examples show why the bracketed formula and equality boundary matter. A first-year or prior-loss case should be reviewed using its actual prior-year position; do not invent a negative advance or refund from an arithmetic result.

Match the dates to the taxpayer’s actual year

For a calendar-year taxpayer, the ordinary month-end dates are 30 June, 30 September and 31 December. A non-calendar tax year requires the corresponding sixth, ninth and twelfth months of that year. Review short periods, year changes or special sector arrangements before copying a standard calendar.

Dariba recommends a treasury schedule linking each due date to the approved computation, payment instruction, confirmation and account allocation. This is a control recommendation, not a new statutory threshold. It prevents an amount paid under another tax reference from being assumed to settle the advance without reconciliation.

A reduction requires the stated grounds and process

Article 70(c) permits ZATCA to reduce a payment where it is satisfied that the taxpayer’s current-year income, excluding income subject to withholding under Article 68, will be substantially lower than the preceding year’s income. Regulations Article 64(2) specifies a decrease of at least 30% in the stated comparison and a reduction proportionate to the decline. A forecast below last year’s result does not automatically authorise the company to pay less.

Article 64(3) requires the first payment in full by its deadline, followed by a written, evidenced request for reduction of subsequent payments. It provides a decision period of 30 working days from receipt. Retain the forecast, management accounts, reasons, submission and actual decision. A pending request should not be described as an approved reduction.

The current-income exclusion in Article 70(c) and the prior-year withholding subtraction in Article 70(a)‘s formula are separate rules. Dariba recommendation: support the reduction request with the relevant income comparison as well as the ordinary advance calculation. Do not substitute withholding remitted for suppliers, or an unexplained accounting-profit decline, for either statutory test.

Source: current Arabic Income Tax Law, Article 70(a)–(c), pp. 30–31, read with Regulations Article 64(1)–(3), p. 36.

Existing oil-sector arrangements have a specific reservation

Regulations Article 64(4) states that these advance-payment provisions do not prejudice the existing arrangements with companies engaged in producing oil and hydrocarbon materials in this respect. The reservation concerns the stated existing arrangements and the identified production activity.

Dariba analysis: establish the actual arrangement, company, activity and relevant period before reaching a different payment conclusion. Paragraph (4) should not be turned into a general exemption for every energy business, gas activity, supplier or company with an oil-sector shareholder. Nor does a special arrangement for one taxpayer establish the treatment of another taxpayer.

Keep the arrangement and its authority with the advance schedule. Where no applicable arrangement is established, a description such as “oil-related” does not itself replace the ordinary eligibility, computation, due dates or reduction procedure explained above.

Source: current Arabic Regulations, Article 64(4), p. 36.

Reconcile the advances to the annual liability

Article 70(d) makes payments under the article credits on account of the year’s tax. Dariba illustration: assume all three SAR 700,000 payments were validly made and final tax before those advances is SAR 2.4 million, with no other relevant credits or adjustments. The remaining annual settlement is SAR 300,000.

An overpayment requires the applicable claim or credit process; it should not be confused with a loan to ZATCA carrying an automatic return. The return guide explains annual settlement. Retain the bank evidence and tax-account allocation, because a planned payment and a settled payment are different facts.

Late advances and payment relief remain distinct

Article 70(e) applies collection procedures to advances. Regulations Article 64 and Article 68 address late-payment consequences, including the stated 1% per completed 30-day delay rule. Actual liability and any current relief depend on their conditions; the annual return does not erase the original payment dates.

A request to reduce future advances is different from an instalment plan for an existing tax debt or an initiative providing conditional penalty relief. Use the correct procedure and current official terms for each. No numbered advance-payment example is attributed to the May 2026 simplified guideline; the calculations above are Dariba illustrations of Articles 70 and 64.