Critical updates to the VAT Implementing Regulations

28 April 2025 – The Board of Directors of the Zakat, Tax and Customs Authority (ZATCA) has approved amendments to the Value Added Tax (VAT) Implementing Regulations in Saudi Arabia (KSA) via decision number (01-06-24) dated 17/05/1446H corresponding to 19 November 2024, which were recently published in the official Saudi Gazette on 18 April 2025. These significant changes demand immediate attention and action by businesses across various sectors. 

The key amendments to the KSA VAT Implementing Regulations include:

• Stricter criteria for forming VAT groups with a 180-day grace period for existing VAT groups to comply. VAT refund-eligible entities are largely excluded with limited exceptions. This is likely to impact organizations in the property sector in particular.
• Expanded definition of ‘Services Supply’ to include transactions such as, suspending rights, providing facilities, undertaking to refrain from or allow specific actions, and permitting use of intangible assets.
• Goods retained after ceasing economic activity or as a consequence of becoming ineligible for VAT registration are now regarded as deemed supplies, with VAT due on the earlier of the cessation or deregistration date.
• Tighter conditions on business continuity post-transfer with mandatory reporting to ZATCA and clarified compliance obligations.
• Zero-rating for supplies to and within customs suspension situations, re-exports, and special zone movements, with strict documentation.
• Online platforms may be responsible for VAT obligations arising from transactions with non-resident suppliers.
• Broadened eligibility for VAT refunds for designated persons with increased minimum threshold to SAR 5k, detailed requirements, and monthly submissions permitted in certain cases.
• Enhanced Tourist Refund Scheme and clarification of eligible goods for VAT refunds. GCC tourists remain eligible until the e-service system is integrated.

Other amendments enhance taxpayer compliance with additional requirements and clarifications on deregistration, nominal supplies, tax points post-cessation, fair market value application, and VAT error corrections. They also provide flexibility for zero-rating supplies to non-resident customers, relaxed conditions for zero-rating military supplies, restrictions on input VAT deductions, and a 15-day timeframe for issuing tax debit/credit notes. 

For more details, refer to the updated KSA VAT Implementing Regulations here. ZATCA has also issued a detailed guideline clarifying these amendments, available here.

Action required

Taxpayers, especially those operating with VAT groups, importing/exporting goods, engaging in e-commerce, or processing VAT refunds are recommended to: 

• Conduct a thorough impact assessment to identify how these changes affect current business processes, supply chains, and compliance strategies.
• Integrate these updates strategically into financial operations and systems to maintain compliance and leverage new opportunities.
  
• Address contracts influenced by the expanded definition of services immediately and enhance training for concerned staff.
• Seek guidance from VAT professionals for personalized insights on compliance obligations and strategic planning.

Notice

The above is only a brief summary of the current update, is valid at the time of circulation and is based only on information currently available in the public domain which is subject to change. This alert has been written in general terms and does not constitute any form of advice or recommendation by Deloitte and therefore cannot be relied on to cover specific situations; application of the principles set out will depend upon the particular circumstances involved and we highly recommend that you obtain professional advice before acting or refraining from acting on any of the contents of this publication. Deloitte accepts no duty of care or liability for any loss occasioned to any person acting or refraining from action as a result of any material in this publication.

Deloitte and Touche Middle East would be pleased to advise readers on how to apply the principles set out in this publication to their specific circumstances. Deloitte accepts no duty of care or liability for any loss occasioned to any person acting or refraining from action as a result of any material in this publication.