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Penalty Examples

Late Payment Penalty (LPP)
Brian is a sole trader and as at 1 January 2004 he owed SR 100,000 in business tax for the prior year assessments.

Brian finally pays his debt on 1 July 2006 (911 days late).

Therefore the LPP is equal to:
(100,000 ×20% ×911) / 365 = SR 49,917.81


Late Lodgement Penalty (LLP)
Russell lodged his 2005 tax return 632 days late. The tax return established a liability of SR 278,000 of which it had made provisional tax instalments of SR 78,000.

Therefore the LLP is equal to:
( (278,000 - 78,000) × 20% × 632 ) / 365 = SR 69,260.28

If Russell had lodge his return 7 years (2555 days later)

Therefore the LPP is equal to:
( (278,000 - 78,000) × 20% × 2555) / 365 = SR 280,000, therefore SR 200,000

The law caps the LLP to 100% of the established liability at lodgement.


Incorrect Return Penalty (IRP)
A business lodged its 2005 tax return on the 1 July 2006. It took 3 months to assess as further information was required and assessments issued on the 1 October 2006 (the period was 154 days). The return as lodged had a tax liability of SR 15,000. However, after changes made at the assessing stage the liability had increased to SR 25,000.

Therefore the IRP is equal to:
( (25,000 - 10,000) × 20% × 154 ) / 365 = SR 843.84


Know more about
Exchange Of Information
Self-Assessment for Business Tax
The Self-Assessment System – Assessing your own tax liabilities
Value Added Tax
The Tax and Customs Agent Board (TACAB)
Lodgment of Partnership Business Tax Return
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