Bookkeeping in Saudi Arabia: Top 5 Challenges Businesses Face and How to Overcome Them

Bookkeeping in Saudi Arabia is no longer a simple back-office task; it’s a compliance-critical function governed by ZATCA, SOCPA, and the Law of Commercial Books. As businesses expand and digital transformation accelerates, maintaining compliant accounting records in both Arabic and English has become increasingly important.

Tax compliance and meeting legal requirements are now central to bookkeeping in the KSA region, requiring businesses to maintain proper records, adhere to deadlines, and integrate technology to ensure compliance.

Saudi Arabia’s accounting landscape is shaped by new mandates like ZATCA’s e-invoicing (FATOORAH), VAT and Zakat compliance, and IFRS 18/19 adoption by SOCPA. These updates aim to modernise financial practices, improve transparency, and align the Kingdom with international standards under Vision 2030.

However, the changes also introduce operational and technical challenges for finance teams. From integrating e-invoicing APIs to managing VAT records and Arabic documentation, errors can result in significant fines and reputational damage. Complying with these evolving regulations is essential for effective decision making and long-term business growth.

To help your business stay compliant and audit-ready, here are the five biggest bookkeeping challenges and how to solve them.

1. Keeping Up with ZATCA’s E-Invoicing Compliance

Since ZATCA launched its e-invoicing (FATOORAH) system, companies must now generate and report invoices digitally. The rollout is happening in waves, with the latest including businesses earning over SAR 375,000 annually.

E-invoicing records must be stored in electronic form, and ZATCA requires that these records be kept on a central server located within Saudi Arabia or on a local system accessible in the country to ensure compliance and facilitate audits.

Non-compliance, such as missing QR codes, invalid XML files, or unregistered devices, can result in suspension of operations or fines of up to SAR 50,000.

How to Stay Compliant:

• Integrate your ERP or accounting software with ZATCA’s system.

• Validate digital signatures and invoice formats (PDF-A3/XML).

• Conduct a Phase 2 readiness test before each new wave.

2. Managing VAT, Zakat, and Corporate Tax Together

Saudi entities often deal with multiple tax bases: VAT (15%), Zakat (2.5%), and corporate income tax (20%) for foreign ownership. Without precise record-keeping, it’s easy to misclassify transactions or overlook deadlines. Businesses must accurately record all financial transactions and maintain supporting accounting documents, including bank statements and other records, to ensure compliance with all applicable taxes.

This mix of ZATCA and GAZT regulations makes reconciliation and documentation particularly complex, especially for multinational firms. Taxable persons are required to document the tax charged on each supply and retain additional records as required by tax authorities for compliance purposes.

How to Stay Compliant:

• Maintain separate ledgers for Zakat and corporate tax.

• Use clear accounting policies for mixed ownership.

• Reconcile VAT filings monthly and retain all supporting invoices.

3. Meeting Arabic Bookkeeping & Record-Retention Rules

Under the Law of Commercial Books, all accounting records must be maintained in Arabic and stored physically or digitally within the Kingdom for at least 10 years. The retention period for VAT records in Saudi Arabia is at least six years, with a minimum period set by law, and physical copies of documents must be available for inspection.

ZATCA also mandates VAT records retention for 6–15 years, depending on asset type. For a capital asset with a useful life of less than six years, records must be retained for the asset's useful life plus an additional five years, as required by Saudi Arabia VAT regulations.

Failure to comply can trigger penalties during audits or VAT refund reviews.

How to Stay Compliant:

• Use bilingual accounting software supporting Arabic and English.

• Establish a record-retention policy with backup copies stored on-shore.

• Regularly audit your archives to ensure accessibility and accuracy.

4. Navigating IFRS and SOCPA Updates

SOCPA has adopted the latest IFRS 18 and IFRS 19, changing how financial statements are presented and how subsidiaries consolidate results. It is crucial for businesses to ensure compliance with IFRS standards when updating their chart of accounts and note disclosures.

For SMEs, this transition can disrupt existing bookkeeping practices and require retraining staff.

How to Stay Compliant:

• Align your financial statement templates with IFRS 18/19.

• Seek professional accounting services that follow SOCPA standards.

• Automate closing processes to ensure timely financial reporting.

5. Avoiding System & Skill Gaps in Bookkeeping

A major challenge for many businesses is keeping up with VAT accounting requirements and the cash accounting scheme, especially when they lack the right systems and expertise. Many small businesses still rely on manual bookkeeping or outdated software not aligned with ZATCA specifications. As a result, they struggle with e-invoicing uploads, VAT reconciliations, and audit evidence.

Maintaining accurate records of annual turnover is essential for proving eligibility under the cash accounting scheme and for proper VAT documentation and reporting.

How to Stay Compliant:

• Choose e-invoicing software for small businesses KSA approved by ZATCA.

• Train your accountants on VAT submission and digital audit trails.

• Conduct quarterly bookkeeping reviews to identify and fix discrepancies early.

Why Bookkeeping Matters for Businesses ?

Bookkeeping is the backbone of accurate financial management for businesses, ensuring that every financial transaction is properly recorded and every financial record is up to date. In a regulatory environment shaped by evolving tax laws and the unified VAT agreement, maintaining precise and compliant records is not just a best practice; it’s a legal requirement. Effective bookkeeping enables Saudi businesses to make informed decisions, drive business growth, and respond confidently to regulatory requirements.

Penalties for Non-Compliance

ZATCA actively enforces bookkeeping and VAT regulations. Non-maintenance of required records can result in significant penalties and audit complications. Penalties may include:

• SAR 10,000–50,000 for incomplete or missing records.

• Operational suspension for repeated e-invoicing violations.

• Zakat reassessment and tax penalties for inaccurate filings.

Businesses failing to maintain Arabic books or meet retention deadlines risk severe reputational and financial consequences.

Partner with TASC for 100% Bookkeeping Compliance

With 18 years of regional outsourcing expertise, TASC Corporate Services helps businesses manage their accounting and bookkeeping in Saudi Arabia with full compliance confidence.

Our AI-powered outsourcing experience combines intelligent automation with local expertise to ensure your company meets ZATCA, SOCPA, and Commercial Books Law requirements from VAT filing and e-invoicing setup to Zakat reconciliation and IFRS reporting.

Get in touch with our experts today to simplify compliance, reduce costs, and stay audit-ready year-round.

Frequently Asked Questions on Bookkeeping in Saudi Arabia

Q1: What records must be maintained under Saudi bookkeeping law?
All financial books, invoices, and statements must be kept in Arabic and retained for 10 years (6–15 years for VAT-related documents). In addition, certain records, such as those related to the profit margin method or such supplies, must be maintained for VAT compliance.

Q2: Is e-invoicing mandatory for all Saudi businesses?
Yes. As of 2025, ZATCA Phase 2 applies to nearly all registered taxpayers. Integration with the authority’s system is required.

Q3: What happens if my VAT returns are delayed?
ZATCA imposes fines starting from 5% of unpaid tax for late filings, increasing up to 25% for repeated delays.

Q4: Can I outsource my bookkeeping in Saudi Arabia?
Absolutely. Many SMEs partner with licensed firms like TASC to ensure compliance, reduce overheads, and improve accuracy.

Q5: What are the VAT record-keeping requirements for non-resident businesses in Saudi Arabia?
Non-resident taxable persons must appoint a tax representative to maintain VAT records, invoices, and documentation for all such supplies in Saudi Arabia. Failure to appoint a tax representative or non maintenance of certain records can result in penalties. This includes keeping records for transactions under the profit margin method, as well as all other VAT-related documents, to ensure compliance and audit readiness.