{"id":262,"date":"2026-05-28T17:13:25","date_gmt":"2026-05-28T17:13:25","guid":{"rendered":"https:\/\/www.dariba.co\/?p=262"},"modified":"2026-05-28T17:13:25","modified_gmt":"2026-05-28T17:13:25","slug":"advance-tax-payments","status":"publish","type":"post","link":"https:\/\/www.dariba.co\/?p=262","title":{"rendered":"Advance Tax Payments Under Saudi CIT:The Quarterly Payment Mechanism"},"content":{"rendered":"\n
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Part of: Corporate Income Tax in Saudi Arabia: The Complete Guide<\/a><\/div>\n<\/div>\n\n
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\n 01<\/span>\n

The Advance Payment Obligation \u2014 How It Arises<\/h2>\n <\/div>\n

The advance payment obligation kicks in once a CIT taxpayer has earned income during a tax year and has a prior year CIT return from which the payment base can be calculated. A company in its first year of operations makes no advance payments \u2014 there is no prior year return. From year two, the clock starts.<\/p>\n

Under Article 64 of the Implementing Regulations, advance payments are defined as payments made by the taxpayer during the tax year at prescribed early dates. Two conditions must be met for the obligation to arise: the taxpayer has earned income during the current tax year, and there is a prior year return from which the advance payment base is calculated.<\/p>\n

The purpose of advance payments is straightforward: it accelerates tax collection during the year, reducing the gap between earning income and paying tax on it. For Saudi Arabia’s tax authorities, it improves revenue predictability. For taxpayers, it creates a mid-year cash outflow that must be built into treasury planning from the outset of operations.<\/p>\n <\/section>\n\n

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\n 02<\/span>\n

Calculating the Advance Payment Amount<\/h2>\n <\/div>\n

The advance payment calculation has a specific formula. Start with the taxpayer’s CIT liability from the prior year’s return. Subtract the WHT that was withheld at source on the taxpayer’s income in that prior year (because that WHT already represents tax paid). The result is the prior year net tax liability. Each of the three advance payments is 25% of that figure.<\/p>\n

In total, the three advance payments represent 75% of the prior year net CIT liability. The remaining balance \u2014 adjusted for actual current-year performance \u2014 is settled with the annual return filing within 120 days of the fiscal year-end.<\/p>\n\n

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Worked Example \u2014 Advance Payment Calculation<\/div>\n

Pacific Engineering Arabia LLC (100% foreign-owned) filed its Year 1 CIT return showing: CIT liability of SAR 1,200,000, WHT withheld on the company’s income during Year 1 of SAR 100,000. Net prior year liability: SAR 1,200,000 \u2212 SAR 100,000 = SAR 1,100,000.<\/p>\n

Each Year 2 advance payment: 25% \u00d7 SAR 1,100,000 = SAR 275,000.
\n Payment 1 \u2014 30 June: SAR 275,000.
\n Payment 2 \u2014 30 September: SAR 275,000.
\n Payment 3 \u2014 31 December: SAR 275,000.
\n Total advance payments made: SAR 825,000.<\/p>\n

Year 2 final return (filed by 30 April Year 3): If actual Year 2 CIT liability is SAR 1,400,000 and WHT on Year 2 income is SAR 80,000, the net Year 2 liability is SAR 1,320,000. Less advance payments of SAR 825,000. Balance due at filing: SAR 495,000.<\/p>\n <\/div>\n\n

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Year One vs Year Two Cash Flow<\/div>\n

In its first year, a company pays no advance payments. All CIT is paid at the 120-day return deadline. In year two, the company faces three advance payments totalling 75% of prior year net liability \u2014 plus any balance at the final return. If year one was profitable, year two cash tax can be substantially front-loaded compared to what a company might expect from first-year experience. Model this explicitly.<\/p>\n <\/div>\n <\/section>\n\n

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\n 03<\/span>\n

Payment Dates \u2014 When Each Instalment Is Due<\/h2>\n <\/div>\n

The three advance payments are due on the last day<\/em> of the sixth, ninth, and twelfth months of the taxpayer’s fiscal year. For calendar-year entities, this means 30 June, 30 September, and 31 December. For entities operating on a non-calendar fiscal year, the dates shift accordingly.<\/p>\n

These are hard deadlines. A delay of even one day beyond the due date triggers the 1% per 30-day delay penalty on the overdue payment amount. The delay penalty begins to accrue on day one of the delay and accumulates for each full 30-day period. Delays of less than 30 days do not attract the penalty \u2014 but anything beyond 30 days from the due date does.<\/p>\n\n

\n \n \n \n \n
Payment<\/th>\n Due Date (Calendar Year)<\/th>\n Amount<\/th>\n <\/tr>\n <\/thead>\n
1st Advance Payment<\/td>30 June<\/td>25% of prior year net CIT liability<\/td><\/tr>\n
2nd Advance Payment<\/td>30 September<\/td>25% of prior year net CIT liability<\/td><\/tr>\n
3rd Advance Payment<\/td>31 December<\/td>25% of prior year net CIT liability<\/td><\/tr>\n
Balance at Annual Return<\/td>30 April (120 days from year-end)<\/td>Actual liability minus advance payments and WHT credits<\/td><\/tr>\n <\/tbody>\n <\/table>\n <\/div>\n <\/section>\n\n
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\n 04<\/span>\n

Reduction Requests: What to Do When Income Drops<\/h2>\n <\/div>\n

The advance payment mechanism creates a potential cash flow mismatch when a company’s current-year income is significantly lower than the prior year. A company that earned SAR 10 million in Year 1 but expects SAR 2 million in Year 2 faces advance payments based on the Year 1 liability \u2014 dramatically overstating the expected Year 2 tax.<\/p>\n

ZATCA provides a formal reduction mechanism. Under Article 64(2)\u2013(3) of the Implementing Regulations, ZATCA may reduce advance payments if it is satisfied that the current-year income will be at least 30% lower than the prior year. To request a reduction, the taxpayer must:<\/p>\n