ZATCA Announces Extension of Penalty Cancellation and Exemption Initiative Until 30 June 2025

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The Zakat, Tax and Customs Authority (ZATCA) has announced a major decision by the Minister of Finance to extend the Cancellation of Fines and Exemption of Financial Penalties Initiative for an additional six months, until 30 June 2025. This initiative, which was initially introduced to support taxpayers, provides exemptions from a wide range of penalties under Saudi Arabia’s tax laws. The extension aims to further ease the financial burden on businesses and individuals, ensuring compliance with tax regulations while fostering a supportive environment for economic growth.

Key Details of the Initiative

The initiative covers exemptions from the following penalties:

1. Late Registration Penalties: Taxpayers who failed to register under applicable tax laws within the required timeframe can benefit from waived penalties.
   
   
2. Late Payment Penalties: Penalties for delays in paying taxes due will be exempted.
   
   
3. Late Filing of Returns: Fines for failing to submit tax returns on time will be waived.
   
   
4. VAT Return Correction Fines: Penalties for errors in VAT returns that require correction are included in the exemption.
   
   
5. E-Invoicing Violations: Fines related to non-compliance with e-invoicing regulations, including field violations, are covered.
   
   
6. General VAT Provisions: Penalties for violations of general VAT rules are also included.

Conditions to Benefit from the Initiative

To take advantage of this initiative, taxpayers must meet the following conditions:

1. Registration: The taxpayer must be registered under the relevant tax law.
   
   
2. Submission of Outstanding Returns: All previously unsubmitted tax returns must be filed with ZATCA.
   
   
3. Payment of Principal Tax Debt: Taxpayers must pay the principal amount of tax owed for the returns submitted or corrected. This ensures accurate disclosure of outstanding tax liabilities.
   
   
4. Installment Payment Plans: Taxpayers who are unable to pay the full amount upfront can request an installment payment plan from ZATCA. However, the application for the installment plan must be submitted while the initiative is still in effect (i.e., before 30 June 2025). Additionally, all installments must be paid by the due dates specified in the ZATCA-approved plan.

Exclusions from the Initiative

While the initiative provides significant relief, it does not cover the following:

• Tax Evasion Violations: Penalties related to tax evasion are excluded from the exemption.
  
  
• Previously Paid Penalties: Penalties that were paid before the effective date of the initiative are not eligible for refunds or exemptions.
  
  
• Returns Due After 31 December 2024: Penalties related to tax returns that must be submitted after 31 December 2024 are not covered.

How to Access the Initiative

ZATCA has published a simplified guideline on its official website, providing detailed information about the initiative. The guideline includes:

• A comprehensive explanation of the types of penalties covered under the initiative.
  
  
• Clarification of the conditions for benefiting from the exemption.
  
  
• Steps for requesting installment payment plans.
  
  
• An overview of field control violations and their implications.

Taxpayers are encouraged to review the guideline to fully understand the initiative’s scope and requirements.

Importance of the Initiative

The extension of this initiative reflects the Saudi government’s commitment to supporting taxpayers and promoting compliance with tax laws. By providing relief from financial penalties, ZATCA aims to:

• Encourage taxpayers to rectify past non-compliance without the fear of excessive fines.
  
  
• Reduce the financial burden on businesses, particularly small and medium enterprises (SMEs), which may have faced challenges during economic fluctuations.
  
  
• Strengthen the relationship between taxpayers and the tax authority by fostering a cooperative and supportive environment.

Next Steps for Taxpayers

Taxpayers who wish to benefit from this initiative should take the following steps:

1. Review Outstanding Obligations: Identify any unsubmitted returns, unpaid taxes, or penalties that may qualify for exemption.
   
   
2. Submit Required Documentation: File all outstanding returns and ensure accurate disclosure of tax liabilities.
   
   
3. Request Installment Plans (if needed): Apply for an installment payment plan if unable to pay the full amount immediately.
   
   
4. Stay Informed: Regularly check ZATCA’s official website for updates and additional resources related to the initiative.

Conclusion

The extension of the Cancellation of Fines and Exemption of Financial Penalties Initiative until 30 June 2025 is a welcome development for taxpayers in Saudi Arabia. It provides an opportunity for businesses and individuals to resolve past compliance issues and align with tax regulations without incurring significant financial penalties. Taxpayers are encouraged to act promptly to take full advantage of this initiative and ensure compliance with ZATCA’s requirements.

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