Saudi Arabia Approves Major Updates to VAT Regulations, Introducing New Rules for E-Commerce, VAT Groups, and Refunds

KSA, 9 May, 2025 : The Zakat, Tax and Customs Authority (ZATCA) has officially approved a comprehensive set of amendments to Saudi Arabia’s VAT Implementing Regulations, published in the Official Gazette on 18 April 2025. The reforms introduce new compliance rules across sectors including VAT grouping, digital marketplaces, and refunds, with varying implementation timelines.

Key Changes:

• VAT Group Registration: Now permitted for two or more resident legal persons if certain ownership and control thresholds are met. Entities in special economic zones or other VAT groups are excluded. A formal agreement between members is now a registration requirement.

• Digital Marketplaces: From 1 January 2026, online platforms will be considered the deemed supplier for VAT purposes when facilitating sales for non-resident or non-registered suppliers, unless specific conditions are met.

• Deemed Supplies & Transfers: The rules around deemed supply have been broadened, notably where businesses retain goods after ceasing activity. More clarity has also been provided on business transfers, requiring timely ZATCA notification and outlining input VAT recovery responsibilities.

• Special Zones & Customs Suspension: Goods and services within or between special zones are now subject to detailed VAT rules. Imports under customs suspension will defer VAT until release. Energy supplies to these zones are taxed at standard rates.

• Tourist Refund Scheme: Tourists will be able to claim VAT refunds on eligible purchases through approved service providers at a 0% VAT rate. More details will be announced by ZATCA.

• Other Updates: New obligations include deadlines for credit note issuance, stricter refund procedures, rules on unpaid input VAT, and clarification on non-deductible VAT.

Implementation Timeline:

• Immediate Effect: Most amendments from 18 April 2025.

• 15 October 2025: VAT Grouping provisions.

• 1 January 2026: Deemed supplier rules for electronic marketplaces.

ZATCA has also released guidance to support compliance and interpretation of the updated regulations. Businesses are advised to assess the changes promptly and align their systems, contracts, and VAT processes accordingly.