Saudi Arabia VAT Implementing Regulations 2025: Key Changes for Businesses

The Saudi Arabia Tax and Customs Authority (ZATCA) announced that the proposed amendments to the VAT Implementing Regulations from November 19, 2024, have been approved on April 18, 2025. 

In addition to the announcement, ZATCA released the amended text of the Implementing Regulations of the VAT Law and Guideline for Clarifying Amendments to the Executive Regulation of Value Added Tax Issued by the Decision of the Board of Directors of the Authority (Guidelines).

Impact of Amendments on Taxable Persons

The amended VAT rules define stricter conditions for VAT group formations, stating that every entity must now individually engage in taxable economic activities and be eligible for its VAT registration. The changes mark a shift from the previous rule, under which it was sufficient for just one group member to meet these requirements. Additionally, certain entities are excluded from joining a VAT group, including those licensed to operate in special zones with suspended customs status.

Furthermore, amendments require that taxable persons who stop carrying out economic activities must still retain their invoices, notifications, books, and records for a specified period. Additionally, deregistration does not exempt taxable persons from their responsibility to settle any outstanding amounts owed to the ZATCA that arose before their deregistration date.

Additionally, the amendments clarify that grants provided to taxable persons for goods and services by government bodies, which benefit the government, are treated as consideration or a fee for taxable supplies. Thus, these grants are not exempt from VAT.

One of the most crucial clarifications relates to the definition of digital markets, which are defined as platforms that enable suppliers to display and sell their products. Moreover, it is underlined that to be considered digital markets, online platforms must actively facilitate transactions. Simply processing payments or redirecting customers is not sufficient to classify them as digital markets.

Besides stated changes, the VAT Implementing Regulations and Guidelines define and clarify new rules relating to the eligible persons for VAT refund provisions, offsetting refundable amounts with other amounts due to the ZATCA, VAT error time limits, VAT suspension, and many other essential matters.

Conclusion

The Amended VAT Implementing Regulations introduced numerous significant changes that affect taxable persons. Therefore, taxable persons must understand these changes and analyse the impact on their business operations. Moreover, all taxable persons should carefully study these changes to determine which rules apply to them and what new requirements or conditions they must meet and fulfill.

Source: EY