Kingdom of Saudi Arabia​ Approved amendments to the VAT Implementing Regulations

Two or more legal persons may now apply for VAT group registration in Saudi Arabia, provided the following key conditions are met:​

• Residency & VAT Eligibility: All members must be residents in the Kingdom and eligible for VAT registration.​

• Control Requirement: At least 50% ownership, voting rights, or market value must be directly or indirectly held by the same legal person(s), or one member must have effective control over the others.​

• Special Zones Restriction: Group members must not be licensed to operate in special economic zones with unique regulatory treatment or be part of another VAT group under customs suspension arrangements.​

• Refund Eligibility: Applicants or group members must not be classified as VAT refund eligible persons under Article 70 of the VAT Implementing Regulations, except:​

  • Licensed real estate developers whose activities are limited solely to property sales and transfers of ownership to his employees;​

  • Eligible person for refund as a donor to public benefit projects.​

All conditions must be continuously met throughout the duration of the VAT group’s registration.​

Additionally, a new requirement has been introduced mandating the submission of a copy of the agreement between the parties as part of the VAT group registration application. This agreement must outline the relevant commitments and obligations of each member.​

The scope of deemed supplies (nominal supplies) has been expanded to include cases such as the retention of goods following the cessation of economic activity, or where a taxable person is deemed ineligible for VAT registration.​

In addition, the value of a deemed supply must be adjusted to include the proportionate input VAT previously deducted or refunded in connection with that supply. This includes VAT incurred on purchases, imports, production, and similar activities. If the taxable person disallows or blocks the deduction or refund of the input VAT, the deemed supply provision will not apply.

Additional clarification has been provided regarding what constitutes a 'transfer of economic activity.' This includes scenarios such as the transfer of all tangible and intangible assets, and the continued use of goods or services to carry out the same economic activity as that of the transferor.​

In the case of a business transfer, both the transferor and the recipient are now required to notify ZATCA by the end of the month following the month in which the transfer occurs. ZATCA has also specified the information that must be included with the notification.

The new regulations provide further clarification regarding input VAT recovery in the context of a transfer of economic activity. For instance, a) input VAT deduction or refund in relation to the transferred economic activity can be claimed by the recipients in specific cases under article 40; b) the Tax Identification Number (TIN) remains with the transferor and cannot be transferred to the recipient. Taxable persons are required to cancel their VAT registration in the event of a full business transfer; c) the transfer of economic activity is not intended to alter or distort the respective tax obligations of the transferor and the recipient before or after the transfer, unless otherwise explicitly agreed upon in a binding contract between the parties. In all cases, however, the recipient will not be held liable for any VAT liabilities or infringements committed by the transferor prior to the transfer

In light of the existing customs suspension arrangements and the activation of special zones in Saudi Arabia, the new VAT regulations provide the following guidance:​

• 0% VAT may be applied to goods supplied into a customs suspension situation, as well as to goods that are re-exported after being temporarily imported.​

• VAT on imports under customs suspension is to be suspended until the goods are released from that status.​

• Goods leaving customs suspension for export outside the GCC (or outside Saudi Arabia until the Electronic Services System (ESS) is implemented) will be treated as exports for VAT purposes, subject to meeting standard export conditions.​

• Imports and supplies to, within, and between special zones will be subject to VAT based on the new rules, which include strict compliance conditions.​

• Supplies of water and all forms of energy (including electricity, gas, heating, and cooling) into special zones will be subject to VAT at the standard rate.

The new regulations provided a definition of the electronic marketplace and indicated that when an electronic marketplace acts as an intermediary for a non-resident supplier (Scenario A) or a non-registered resident supplier (Scenario B) within the Kingdom, it will, in both cases, be treated as having acquired and supplied the services—or goods and services—on its own account. Therefore, it will be considered a deemed supplier. As such, the marketplace will be responsible for reporting and remitting the VAT on those supplies.​

Exceptions of the deemed supplier rule:​

• The above deemed supplier obligation does not apply Under scenario A if : a) the agreement explicitly states that the non-resident supplier is the principal supplier, supported by appropriate invoice, and receipt and b) the electronic marketplace does not engage in any of the following: setting the terms and conditions relating to the supply of services to customers, determined the consideration to be received, collected payment from customers, handled customer complaints, or offered promotions or compensation to customers.​

• The above obligation under scenario B does not apply if: a) It is clearly disclosed that the supply is made by a non-registered resident supplier on the platform, and this is properly reflected in the contract, invoice, and receipt, b) There is a contractual relationship directly between the non-registered resident supplier and the customer, in which the supplier sets the terms and conditions and c) The electronic marketplace does not engage in any of the following: setting the terms and conditions relating to the supply of services to customers, determined the consideration to be received, collected payment from customers, handled customer complaints, or offered promotions or compensation to customers.

Tourists are now allowed to refund VAT on eligible purchases provided they export the goods upon departure. The refund process will be handled by approved service providers, these services are subject to 0% VAT.​

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Additional rules regarding the implementation of the tourist refund scheme will be announced by ZATCA’s Governor in due course. These will cover key aspects such as the rollout of the scheme, eligibility requirements, conditions for classifying an individual as a tourist, identification of eligible goods, supplier accreditation, and the procedures and requirements for tourist refund applications.