Value-Added Tax (VAT) amendments

The Value-Added Tax (VAT) amendments in Saudi Arabia have become a key focus for businesses and individuals following the issuance of the new Implementing Regulations in April 2025. These regulations introduced important clarifications and guidelines aimed at simplifying VAT application and ensuring full compliance with the law.

The amendments seek to regulate tax transactions more clearly, align with modern economic developments, including e-commerce and special economic zones, and facilitate VAT refunds for tourists and eligible taxpayers.

VAT Amendments Overview

The VAT amendments in the Kingdom of Saudi Arabia provide a clear legal framework that helps taxpayers comply with new VAT obligations. Key highlights include the following:

VAT Groups

• Allowing the registration of VAT groups consisting of more than one legal person, subject to residency, eligibility, and a minimum of 50% legal control.
• Members must not hold special licenses in special economic zones or belong to another VAT group.
• Submission of a VAT group agreement outlining obligations among members is mandatory.

Supply of Services

• An expanded definition of the supply of services, including:
  • Assignment or waiver of rights.
  • Provision of benefits or advantages.
  • Obligations to refrain from certain actions.
  • Transfer of intangible rights such as patents, trademarks, and copyrights.

Deemed Supplies

• Includes retention of goods after the cessation of economic activity or loss of VAT registration eligibility.
• Adjustment of value to include previously deducted or refunded input VAT, except in cases where VAT deduction was not permitted.

Transfer of an Economic Activity

• Covers the transfer of all tangible and intangible assets, with continuity of the same activity by the transferee.
• Both parties are required to notify the authority by the end of the month following the transfer.
• Clear determination of the rights and obligations of both supplier and recipient regarding input VAT and VAT registration numbers.

Customs Suspension and Special Economic Zones

• Application of 0% VAT on goods under customs suspension or goods re-exported.
• Imposition of 15% VAT on water and energy supplies within special economic zones.

Tourist VAT Refunds and Government Services

• Application of 0% VAT on services related to tourists.
• Government payments are excluded from VAT only if they do not constitute consideration for goods or services supplied as part of an economic activity.

E-Marketplaces and Deemed Suppliers

• Clear determination of when an electronic marketplace is considered the deemed supplier and responsible for VAT.
• Explicit exemptions covering different scenarios involving resident and non-resident suppliers.

VAT Amendments Related to VAT Groups: Conditions and Obligations

The amendments introduce detailed rules governing the registration of multiple entities as a single VAT group:

• More than one legal person may form a VAT group if residency and eligibility requirements are met.
• One or more persons must have effective control of at least 50% of ownership or voting rights.
• Group members may not belong to another VAT group or hold special licenses in regulated special economic zones.
• A VAT group agreement must be submitted, clearly defining the obligations and responsibilities of each member to ensure ongoing compliance.

VAT Amendments on the Supply of Services: Definition and Objectives

The VAT amendments related to the supply of services aim to broaden the scope of taxable services to include non-traditional transactions, such as:

• Full or partial assignment or suspension of rights.
• Provision of facilities or benefits to individuals or businesses.
• Obligations to refrain from performing certain acts or allowing others to do so.
• Transfer of indivisible interests in goods or permitting the use of intangible rights such as patents, copyrights, and trademarks.

VAT Amendments on Deemed Supplies and Transfer of Economic Activity

These amendments focus on regulating deemed supplies and transfers of economic activities:

• Deemed supplies include retaining goods after business cessation or loss of VAT registration eligibility, with adjustments to previously refunded input VAT.
• In the case of transferring an economic activity, the authority must be notified within the month following the transfer.
• Transfers must include all tangible and intangible assets, with continuity of the same activity, and clearly defined VAT obligations for both parties.

VAT Amendments for Special Economic Zones and E-Marketplaces

The VAT amendments introduce clear guidance to ensure tax compliance in special economic zones and e-commerce platforms:

• Goods supplied under customs suspension or re-exported are subject to 0% VAT until released from suspension.
• Goods and services within special economic zones are subject to VAT in accordance with the new rules, with strict compliance requirements.
• E-commerce platforms are considered deemed suppliers when dealing with non-resident or non-registered suppliers, with specific exemptions defined for each scenario.

VAT Amendments and VAT Refunds for Tourists and Government Services

The VAT amendments clarify VAT refund rules to simplify procedures for tourists and businesses:

• Tourists may recover VAT on eligible purchases exported upon departure through approved service providers at a 0% rate.
• Government payments that constitute consideration for the supply of goods or services are not classified as subsidies and therefore remain subject to VAT.
• These amendments aim to streamline refund procedures, enhance transparency, and protect the rights of all parties.

The Role of Wazen in Implementing VAT Amendments

Wazen acts as a strategic partner for taxpayers in addressing the challenges of implementing VAT amendments, offering comprehensive expertise to ensure compliance and minimize tax risks.

Wazen’s role includes:

Impact Assessment

• Evaluating the effect of VAT amendments on internal business operations.
• Identifying compliance gaps and developing corrective action plans.

Systems and Contract Updates

• Amending contracts to align with the new regulations.
• Adjusting accounting and invoicing systems to comply with updated VAT requirements.

Ongoing Monitoring

• Tracking further updates from the Zakat, Tax and Customs Authority (ZATCA).
• Providing advisory support to ensure immediate compliance with all VAT amendments.

VAT Refund Support

• Assisting businesses and tourists in applying the new VAT refund rules.
• Preparing required documentation and reports to maximize VAT recovery benefits.

Conclusion

The VAT amendments in Saudi Arabia represent a significant step toward enhancing tax clarity and ensuring compliance for both individuals and businesses. They provide a comprehensive legal framework governing tax groups, service supplies, deemed supplies, transfers of economic activity, special economic zones, and e-commerce platforms.

Accurate implementation of these amendments enables businesses to improve VAT management, reduce tax risks, and safeguard their refund rights, while offering tourists and other beneficiaries a clearer and more streamlined VAT recovery process.