Issuance of the Rules for the Tax Dispute Resolution Committees (“TDRC”)

What happened?

The Royal Court has issued circular No. 26040 approving the TDRC Rules on 18 December 2019.

The circular clarifies the application of the rules to outstanding objections as well as the jurisdiction of the committees. According to the circular, taxpayers who had previously appealed to the Board of Grievances (“BOG”) and received a decision stating that the BOG does not have any jurisdiction to hear the case have 60 days from the effective date of these rules or the BOG Decision (whichever is later) to appeal to the Appellate Committee. In addition, the circular provides that the tax committees will also have jurisdiction to deal with disputes related to zakat assessments.

Key highlights

The key takeaways from the rules are as follows:

  • The General Authority for Zakat & Tax (“GAZT”) is required to respond to taxpayer’s objections within 90 days from the date of submitting the objection. If the taxpayer receives a rejection or does not receive any response from GAZT within this time limit the taxpayer must request the objection to be transferred to the GAZT’s internal committee for settlement (i.e. the Alternative Dispute Resolution Committee, “ADRC”); or submit an objection to the TDRC.
  • If the taxpayer chooses to transfer the objection to the ADRC, the taxpayer will have the right to submit an objection to the TDRC within 30 days from the date of rejecting the settlement or, in the absence of a successful settlement, the expiry of the time limit specified under the ADRC rules (around 30 to 150 days - to be evaluated on a case by case basis).
  • The objection letter submitted to the TDRC is required to include certain details. If the information provided is incomplete, the claimant will have 15 calendar days from the date of being notified to submit the missing information. If this information is not provided within this timeframe, the case will be dismissed.
  • The defendant is required to submit a response to the General Secretariat for Tax Committees (“GSTC”) within 30 days from the date of being notified about the objection. This period can be extended by an additional 30 days if a request is made to and accepted by the GSTC.
  • All supporting documents submitted to the TDRC are required to be in Arabic or translated into Arabic by a certified translator otherwise the documents will not be accepted.
  • The Parties to the lawsuit may agree to request for the case to be discontinued for a maximum period of 180 days. If any party does not submit a notification that they would like to continue the lawsuit within this period, the claimant will be regarded as dropping his claim.
  • The TDRC is required to issue its decision within 60 days from the date of the first hearing session unless additional time is required by the TDRC.
  • The taxpayer will not be required to pay the amounts under dispute when submitting an objection before the Committee of First Instance. However, it is our understanding that the Committee of First Instance may require the claimant to pay such amounts to proceed with the appeal to the Appellate Committee. The claimant may submit a request to suspend the execution of the decision of the Committee of First Instance in this regard if he/she believes that this may cause him/her damage.

The implications and what next?

The publication of the TDRC rules is a welcome development and provides clarity in a number of areas that were previously uncertain. KSA taxpayers should seek to understand the impact of these rules on their tax disputes.

Previously, it was possible to refer a case to the ADRC after the submission of the objection to the TDRC. It remains to be seen whether this practice will continue or whether the ADRC’s role will be limited to negotiating a settlement before the case is referred to the TDRC.

In terms of immediate actions points, taxpayers that have pending objections outstanding at the GAZT level for more than 90 days may need to request the case to be transferred to the ADRC or submit an objection to the TDRC. Taxpayers that previously submitted an appeal to the BOG and the case was rejected on the basis of non-jurisdiction will be required to consider whether they would like to appeal to the Appellate Committee and submit this appeal within the permitted timeframe.

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