ZATCA’s ‘Cancellation of Fines and Exemption of Financial Penalties’ Initiative

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ZATCA had launched the tax amnesty initiative in March 2020 to mitigate the financial burden faced by taxpayers due to the COVID-19 pandemic. This initiative aimed to offer relief by waiving fines associated with tax non-compliances, provided certain conditions were fulfilled. Over time, recognizing the ongoing challenges, the initiative was extended on several occasions, with the most recent extension spanning from 1 January 2025 to 30 June 2025. 

ZATCA issued a Simplified Guide - Cancellation of Fines and Exemption of Financial Penalties providing details about the amnesty initiative. 

Highlights of the Initiative

The initiative provides an exemption from unpaid financial fines across various tax types, including value added tax (VAT), income tax, excise tax, withholding tax, and real estate transaction tax (RETT). 

Key exemptions include:

• late registration fines - applicable for those registering late under tax laws;
• delayed payment and filing fines - waivers are granted for fines arising from overdue payments or delayed returns;
• return correction penalties - applicable when taxpayers amend VAT returns; and
• VAT fines related to field inspections (failure to maintain accounting invoices and records, failure to issue invoices, debit or credit notes, etc.) and e-invoicing (failure to issue invoices electronically, failure to comply with e-invoicing requirements etc.). 

However, certain fines remain outside the scope of this initiative, viz.

• Fines paid before the effective date of the initiative; 
• Penalties related to tax returns required to be submitted after 31 December 2024; and 
• Fines resulting from tax evasion.

The initiative offers an opportunity to taxpayers to regularise their affairs under almost all important tax regulations. Taxpayers must take advantage of this initiative to regularise their affairs. 

Eligibility Conditions 

Taxpayers must fulfill specific criteria to qualify for the exemptions, viz. 

1.unregistered persons must register with ZATCA where required;

2.taxpayers must submit all outstanding tax returns; and 

3.payment of the full tax principal is required, or an installment plan must be applied for and adhered to until the initiative ends.

Manner of Payment

Taxpayers unable to clear outstanding dues immediately can opt for an installment plan. The process involves submitting an installment request during the initiative, procuring ZATCA’s approval and strictly adhering to the agreed-upon payment schedule. Failure to comply with installment terms may result in reinstatement of the waived fines.

Conclusion

Worldwide, countries introduce amnesty schemes to clear the backlog of pending cases and settle matters with taxpayers. Likewise, ZATCA’s amnesty initiative too offers an opportunity for taxpayers to regularize their tax positions and receive exemptions from certain fines. Taxpayers must take benefit of this initiative in consultation with their advisors. 

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