The Saudi Arabian Higher Appeal Committee (HAC) has upheld a taxpayer's position that in a case where the audited financial statements have been filed and all the required information has been provided in support of the tax returns, the General Authority for Zakat and Tax (GAZT) cannot disregard the financial statements as filed and raise an arbitrary assessment.

In its ruling, the HAC made the following key determinations:

1. The tax base should be based on the taxpayer's return so far as the required evidence in support thereof has been provided to the GAZT.
2. The statutory books form the basis for a fair calculation of the tax base. The deemed basis of assessment is justified in cases where the taxpayer does not keep the required books of accounts.
3. The taxpayer's financial statements should meet the relevant disclosure and presentation requirements in order to be relied upon for calculation of the tax base.
4. A difference between revenue calculated under the percentage of completion method for long-term contracts, and work-in-progress (WIP) costs treated as project costs does not warrant rejection of the statutory books and the imposition of a deemed profit basis assessment.

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CONTACTS

For additional information with respect to this Alert, please contact the following:

Ernst & Young & Co (Public Accountants), Riyadh

• Asim Sheikh
  asim.sheikh@sa.ey.com
• Ahmed Abdullah
  ahmed.abdullah@sa.ey.com
• Amr Farouk
  amr.farouk@sa.ey.com
• Altaf Sarangi
  altaf.sarangi@sa.ey.com
• Craig McAree
  craig.mcaree@sa.ey.com
• Hosam Abdulkareem
  hosam.abdulkareem@sa.ey.com
• Imran Iqbal
  imran.iqbal@sa.ey.com
• Michael Hendroff
  michael.hendroff@ae.ey.com
• Nitesh Jain
  nitesh.jain@sa.ey.com
• Parvez Maqbool
  parvez.maqbool@sa.ey.com
• Sohail Nini
  sohail.nini@sa.ey.com
• Stuart Halstead
  stuart.halstead@sa.ey.com
• Vladimir A. Gidirim
  vladimir.gidirim@sa.ey.com
• Yousef Eldaw
  yousef.eldaw@sa.ey.com

Ernst & Young & Co (Public Accountants), Al-Khobar

• Syed Farhan Zubair
  farhan.zubair@sa.ey.com
• Ali Sainudheen
  ali.sainudheen@sa.ey.com
• Hatem Ghobara
  hatem.ghobara@sa.ey.com
• Javed Aziz Khan
  javed.aziz@sa.ey.com
• Jude deSequeira
  jude.desequeira@sa.ey.com

Ernst & Young & Co (Public Accountants), Jeddah

• Franz-Josef Epping
  franz-josef.epping@sa.ey.com
• Ayman Abu El Izz
  ayman.abueIzz@sa.ey.com
• Hanif Khatri
  hanif.khatri@sa.ey.com
• Hussain Asiri
  hussain.asiri@sa.ey.com
• Imran Ahmed
  imran.ahmed@sa.ey.com
• Irfan Alladin
  irfan.alladin@sa.ey.com
• Mohammed Desin
  mohammed.desin@sa.ey.com

Ernst & Young LLP, Middle East Desk, Houston

• Gareth Lewis
  gareth.lewis1@ey.com

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ATTACHMENT

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