Saudi Arabia’s ZATCA Publishes Key Amendments to VAT Implementing Regulations

On April 18, 2025, Saudi Arabia’s Zakat, Tax and Customs Authority (ZATCA) officially published significant amendments to the Value-Added Tax (VAT) Implementing Regulations in the Official Gazette via Board Resolution No. (01-06-24). These changes—developed through a public consultation process begun on August 28, 2024—clarify critical areas of VAT compliance, including VAT group formation, nominal supplies, transfers of going concern (TOGC), and special zones. Effective immediately (except for select provisions taking effect January 1, 2026), the updated regulations and accompanying guidance aim to enhance transparency, tighten compliance rules, and align Saudi VAT practice with international norms.

Background

The original VAT Implementing Regulations were released in 2018 to operationalize the UAE-modeled VAT Law. Over time, business feedback and evolving economic conditions prompted ZATCA to propose amendments to over 25 Articles of the regulations. After seeking stakeholder input on the Istitlaa public consultation platform, ZATCA finalized and published the amended regulations and a clarifying guideline on November 19, 2024, with the Official Gazette release on April 18, 2025.

Key Amendments

1. VAT Group Registration

• Eligibility Conditions: Two or more resident legal persons may now form a VAT group if they have at least 50% common ownership or effective control, and none operate within special economic zones or under customs suspension arrangements.

• Agreement Requirement: Applicants must submit a signed agreement detailing each member’s commitments when filing for group registration.

• Continuous Compliance: All eligibility criteria must be maintained throughout the VAT group’s registration period.

  
  

2. Nominal (“Deemed”) Supplies

• Expanded Scope: The definition of nominal supplies now explicitly includes cases where a taxable person retains goods after cessation of economic activity or becomes ineligible for VAT registration.

• Input VAT Adjustment: The value of a deemed supply must reflect any input VAT previously deducted or refunded, preventing under-collection of tax where deductions were reversed.

3. Transfer of Going Concern (TOGC)

• Clarified Definitions: A TOGC now covers transfers of all tangible and intangible assets used for the same economic activity.

• Mandatory Notification: Both transferor and recipient must notify ZATCA by the end of the month following the transfer, including detailed information on assets, liabilities, and contracts.

• VAT Registration Cancellation: Transferors must cancel VAT registrations upon a full transfer; recipients are exempt from prior liabilities unless otherwise agreed.

4. Special Zones & Customs Suspension

• 0% VAT Application: Goods entering customs suspension or designated special zones can qualify for zero-rate VAT if conditions are met.

• Re-export Clarification: VAT treatment for goods re-exported after temporary importation is explicitly defined, aligning with customs procedures.

5. Deemed Supplier Provisions

• Effective Date: Article 47(3), governing electronic marketplaces and deemed supplier rules, will take effect January 1, 2026, giving affected parties time to adapt.

Impact on Businesses

• Enhanced Compliance: Clearer definitions and procedural requirements reduce ambiguity, helping companies avoid penalties for misinterpretation.

• Administrative Burden: Firms must update internal processes to handle group registration agreements, TOGC notifications, and input VAT reconciliations.

• System Upgrades: Accounting and ERP systems should be upgraded to reflect revised transaction classifications and reporting fields.

Next Steps for Taxpayers

1. Review the Amended Regulations: Obtain and study the full text of the updated VAT Implementing Regulations and the Guideline for Clarifying Amendments, available on ZATCA’s website.

2. Assess Current Practices: Map existing VAT group structures, asset transfer policies, and special zone activities against the new rules.

3. Update Agreements & Procedures: Draft or amend VAT group agreements, establish TOGC notification workflows, and adjust deemed supply valuation methods.

4. Train Stakeholders: Educate finance, legal, and operations teams on the new regulations, emphasizing changes to group formation, TOGC, and deemed supplies.

5. Engage with Advisors: Consult with VAT specialists or legal counsel to ensure full compliance and optimize structures under the revised framework.

   
   

Conclusion

The April 18, 2025 amendments to Saudi Arabia’s VAT Implementing Regulations represent a comprehensive effort by ZATCA to refine VAT governance, close compliance gaps, and harmonize domestic practice with global standards. Businesses—especially those operating in groups, facilitating economic transfers, or engaging in special zone activities—must act promptly to align their processes, systems, and agreements with the new rules. Proactive adaptation will help minimize risk, avoid penalties, and leverage the benefits of a clearer, more robust VAT regime.