Saudi Arabia amends the VAT implementing regulations

The Board of Directors of the Zakat, Tax and Customs Authority (ZATCA) approved amendments to the VAT Implementing Regulations, which were published in the official gazette on 18 April 2025. The amendments encompass a broad range of provisions, including:

-       VAT Group formation criteria  

-       Scope of deemed supplies

-       Cessation or transfer of economic activity  

-       Qualification criteria for Transfer of Going Concern treatment

-       New deemed supplier rules for electronic marketplaces

-       Tourist refund services

-       Foreign VAT refunds

While most of the amendments are effective immediately, some provisions have delayed implementation dates to allow businesses time to adapt. In addition, the ZATCA published new guidelines to clarify its interpretation of the amended regulations and assist businesses in implementing the changes.

 

Key Changes

Below, we highlight some of the significant changes introduced through the amended VAT regulations.

1.     VAT Grouping

Historically, two or more legal persons conducing an economic activity in KSA and jointly controlled - through at least 50% ownership or voting rights - by a single person/entity (directly or indirectly) could form a VAT group. Under the amended VAT implementing regulations, additional requirements have been introduced:

• Each member must be individually qualify for VAT registration as a taxable person (rather than only one of the members)
• Entities licensed to operate in a special economic zone with a customs suspension status are not eligible to join a VAT group
• Entities eligible for VAT refunds under Article 70 are also excluded, with limited exceptions (e.g., licensed real estate developers or donors to public benefit projects).

The new VAT implementing regulations also require the submission of an agreement by the VAT group members, nominating the VAT group representative and outlining their responsibilities.

2.     Deemed Supplier Provision

The implementation of the VAT regulations now include provisions making electronic marketplaces responsible for VAT collection and remittance on behalf of unregistered resident suppliers under certain conditions.

The amendments introduce a definition of electronic marketplaces to include electronic or digital platforms which allow suppliers to display and sell their products, either as the sole or primary function of the platform.

A platform which simply processes payment, advertises products or redirects visitors to other electronic platforms through which the sale takes place will not be considered as facilitating transactions for the purposes of the deemed supply rules.

3.     Foreign VAT refunds

The changes to the VAT refund rules include:

• Increased refund thresholds: Applications cannot be made for amounts less than SAR5 thousand(increased from SAR1 thousand)
• Flexible refund periods: Refund applications may be submitted yearly, quarterly or monthly (subject to conditions set by the Board of Directors and ZATCA’s approval)
• New procedures fort the change the VAT refund period
• Expanded documentation requirements: Applicants must now provide additional information, such as the date of settlement of tax invoices or customs documentation, where applicable
• Eligible persons must retain books and records for six years from the refund period

Further, the ZATCA can cancel the eligible person’s registration if a person is no longer eligible to claim a refund or intentionally and repeatedly claims tax refunds unlawfully.

 

Effective date

The amended VAT implementing regulations are effective immediately (i.e., from the publication date on 18 April 2025), except for the following provisions:

• VAT grouping will take effect within 180 days from the publication date (i.e., 15 October 2025)

• Deemed supplier will take effect on 1 January 2026.

 

Conclusion

Businesses operating in KSA should carefully assess the impact of the amended VAT regulations on their tax position, group structures and are encouraged to consult with tax counsel if they are uncertain about the implications, or would likely to better understand the changes. 

 

Reference

• Decision No. (01-06-24) of ZATCA’s Board of Directors