Saudi Arabia VAT Implementing Regulations 2025: Key Changes for Businesses

April 28, 2025

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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

What changes were made to Saudi Arabia’s VAT Implementing Regulations in April 2025?

The Saudi Arabia Tax and Customs Authority (ZATCA) approved amendments that include stricter VAT group formation rules, new definitions for digital markets, and updated compliance obligations for taxable persons.

How have the rules for forming VAT groups changed in Saudi Arabia?

Each entity in a VAT group must now individually conduct taxable economic activities and qualify for VAT registration, instead of relying on one qualifying group member.

Are grants provided by the government to taxable persons subject to VAT under the new rules?

Yes, government grants provided in exchange for goods and services that benefit the government are now treated as taxable consideration and are subject to VAT.

What are the new VAT compliance requirements for businesses that stop economic activities?

Even after ceasing operations, businesses must retain invoices, notifications, books, and records for a specified period and settle any outstanding VAT liabilities.

How are digital markets defined under the amended VAT regulations?

Digital markets are platforms that actively facilitate the sale and transaction of goods or services. Simply processing payments or redirecting customers is not enough for a platform to qualify as a digital market.

What additional areas are clarified by the updated VAT Implementing Regulations and Guidelines?

The amendments clarify rules related to VAT refunds, offsetting refundable amounts, VAT error time limits, VAT suspension provisions, and more key compliance matters.

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