ZATCA Executive Regulations of the VAT system changes
On 18 April 2025, the Saudi Arabian Tax and Customs authority, ZATCA, issued a major range of amendments to the VAT law. This included new and clearer rules on: VAT groups; transfer of going concern; e-commerce obligations for sellers and marketplaces; VAT registrations; tourist reclaims; and export & imports. The changes now gazetted in the Umm Al Qura Gazette.
The major changes include:
VAT Grouping Rules Tightened
Saudi Arabia has revised its VAT grouping criteria with stricter rules around residency, control, and eligibility. Entities eligible for VAT refunds—such as real estate developers and public interest projects—can no longer join VAT groups, except in limited cases. A 180-day grace period is granted for existing VAT groups to align with the new requirements.
Deemed Supply Provisions Expanded
The use of business assets after VAT deregistration is now clearly classified as a deemed supply, making it subject to VAT. Supplies made free of charge are not taxable if input VAT was not previously claimed. Also, input VAT recovery must be adjusted for invoices that remain partially unpaid after 12 months.
Business Transfers (TOGC) Reformed
The Transfer of a Going Concern (TOGC) rules now require the transferee to continue the same business activity to qualify for VAT relief. In addition, the transfer must be reported to ZATCA within one month of completion.
Reverse Charge for E-Services Clarified
A new Article 47 introduces clear guidance on when digital platforms or marketplaces are treated as the VAT supplier. If a platform facilitates sales by non-resident or unregistered suppliers, it may become liable for VAT collection.
VAT Refund System Overhauled
Article 70 has been completely restructured. Key changes include:
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Quarterly or annual refund eligibility, depending on the applicant type.
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Refund claims must be submitted within 6 months.
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A minimum refund threshold of SAR 5,000 applies.
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Expanded eligibility for foreign governments, international organizations, and diplomats.
Customs Suspension and Special Zones Clarified
Zero-rating is now extended to supplies under customs suspension, re-exports, and movements to/from special zones, provided strict documentation is maintained.
The VAT refund scheme for tourists now offers clearer eligibility criteria, explicitly excluding food, fuel, and some personal items. Tourists from GCC countries remain eligible until full e-service integration is implemented.
Overall, these updates significantly tighten compliance requirements, enhance transparency, and align with international VAT best practices, especially in areas like e-commerce, VAT recovery, and cross-border transactions.
