Tax Alert: Amendments to the VAT Implementing Regulations

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On 18 April 2025, the Zakat, Tax, and Customs Authority (ZATCA) published Board Resolution No. (01-06-24) in the Official Gazette, officially approving the previously proposed amendments to the Implementing Regulations for Value Added Tax (VAT). These amendments are effective from 18 April 2025, with the exception of the change outlined in Article 47(3), which is addressed separately below.

ZATCA had published the guideline for clarifying the amendments to the VAT Implementing Regulations in Saudi Arabia on 19 November 2024. The guideline can be accessed .

A summary of the key provisions and updates to the amended regulations are provided below:

1. VAT group-related provisions (Articles 10, 11 and 12):

A new condition for forming a VAT group stipulates that all legal persons intending to form a group must have the right to register as taxable persons in accordance with the regulations. Earlier, only one of the members was mandatorily required to comply with this requirement.
The following persons are ineligible to be a member of a VAT group:
- Persons licensed to operate in special economic zones enjoying tariff suspension status.
- Persons eligible for VAT refund in line with the provisions of Article 70 of the regulations.
Notwithstanding the above conditions, licensed real estate developers (LREDs) whose authorized real estate activities are exclusively limited to supplying property to their employees, as well as eligible persons registered as donors for public benefit projects, may still qualify for inclusion in a VAT group.
A copy of the agreement concluded between the members of the VAT group, including the appointment of the tax representative and responsibilities among the members, should be submitted to the tax authority along with the application in the prescribed form.
A grace period of up to 180 days from 18 April 2025 is granted to representative members of existing tax groups to regularize their group鈥檚 status in line with the amended requirements of Article 10 of the VAT Implementing Regulations.

2. Clarification on services subject to VAT (Article 14):

The following persons are ineligible to be a member of a VAT group:
- Granting, assigning, allocating, suspending or abandoning a right.
- Providing a facility or feature.
- Undertaking to refrain from doing or allowing a certain act to be done.
- Agreeing to waive the right to participate in any activity, or not allowing it to take place, or agreeing to carry out any activity.
- Assigning or transferring an indivisible share in a commodity.
- Allowing the exploitation, transfer or assignment of intangible rights, including for example, the rights of authors, inventors, artists, trademark rights and rights that fall into this category in accordance with the regulations in force in the Kingdom.

3. Amendment to the nominal supply provisions (Article 15)

Taxable persons must adjust the value of nominal supplies to reflect the proportionate amount of input VAT that has been deducted or refunded in connection with the direct costs incurred for the import, purchase, production, or supply of goods or services related to those supplies. In addition, the amended VAT Implementing Regulations require taxable persons to retain documentation, evidencing that input VAT related to nominal supplies was not recovered.

4. Transfer of economic activity (Article 17)

In order to qualify the transfer of economic activity as not subject to VAT, it is mandatory that the transferred activity should include all tangible and intangible assets necessary to carry on the business activity.
The supplier and recipient must notify ZATCA about such a transfer within thirty (30) days from the end of the month in which the transfer occurs, using the designated form provided for this purpose.
Further clarification added that where all the transfer conditions mentioned in Article 17 (including notifying ZATCA) are not fulfilled, the transfer shall be considered as a taxable supply.

5. Customs duty suspension and zero-rating (Article 32 bis):

A new Article, Article 32 bis, is added which provides that the supply of goods into a customs duty suspension situation in accordance with the provisions of the unified customs law is subject to zero rate VAT. This includes re-export of transportable goods temporarily imported into the Kingdom for repair, restoration, conversion, or processing, and the services added to those goods are subject to zero-rate tax.
Moreover, similar VAT treatment will be applicable for transactions in Special Economic Zones (SEZs) in the Kingdom provided certain conditions are met. It encompasses the supply of goods to SEZs, their movement within the same or with another SEZ, and their transfer from SEZs to outside Saudi Arabia.

6. Services provided to non-GCC residents (Article 33)

The amendments to Article 33 of the VAT Implementing Regulations provide greater clarity on the zero-rating of services supplied to non-GCC residents. In this regard, sub-clauses (c) and (d) outlining exceptions to zero-rating are amended as below:
- If the customer, or any person related to the customer, benefits directly from the same supplied services when such customer or person is situated in a member state, and the related person is not permitted to deduct the input tax on such services in full.
- If the services are performed in a tangible form in relation to tangible goods which are located within a member state during the supply.

7. Subsidy paid by a government authority to supplier (Article 39)

A clause has been added to Article 39 of the VAT Implementing Regulations to clarify that government payment to suppliers is not considered subsidy if this is a supply consideration in exchange for goods or services provided to the government.

8. Online marketplaces

A new paragraph (4) for Article 47 defines an "online marketplace" as an electronic or digital platform or similar platform whose primary purpose, or one of its primary purposes, is to enable suppliers to display, provide, make available, or contract for their products, whether goods or services, with the customers who benefit from them.

路 The table below summarizes the key amendments and updates to Article 47:

Particulars	Article 47(2)	Article 47(3)
Scenario	Services supplied electronically by a non-resident supplier or suppliers through an online marketplace (OMP).	Goods or services supplied by an unregistered resident supplier or suppliers through OMP.
VAT implication	OMP shall be deemed to have purchased the service from the non-resident supplier and further supplied it to the customer in its own name.	OMP shall be deemed to have purchased the goods or service from the unregistered resident supplier and further supplied it to the customer in its own name.
Exceptions	The above-mentioned provision shall not be applicable provided all the following conditions are satisfied: 1. It is explicitly stated that the non-resident supplier, or suppliers, are the ones making the supply through OMP in a. Contractual arrangement b. Tax invoice c. Receipt issued 2. OMP does not set the terms and conditions related to the supply. 3. OMP neither determines the consideration of the supply nor charges it from the KSA customer. 4. OMP does not collect consideration from the customer. 5. OMP does not handle customer complaints. 6. OMP does not provide any offers or compensations to the KSA customer in relation to the supply.	The above-mentioned provision shall not be applicable provided all the following conditions are satisfied: 1. It is explicitly stated that the unregistered resident supplier, or suppliers, are the ones making the supply through OMP in a. Contractual arrangement b. Tax invoice c. Receipt issued 2. An independent and direct contractual relationship must be established between the unregistered resident supplier and the KSA customer in line with the statutory provisions in KSA. 3. The unregistered resident supplier, or suppliers, must set the terms and conditions related to the supply. 4. OMP neither determines the consideration of the supply nor charges it from the KSA customer. 5. OMP does not collect consideration from the customer. 6. OMP does not handle customer complaints. 7. OMP does not provide any offers or compensations to KSA customer in relation to the supply.
Effective date for amendments	18 April 2025	1 January 2026

9. Goods and services restricted for input VAT deduction (Article 50)

Certain new categories are added in the list of goods/services on which input VAT is not deductible for business regardless of their use in economic activity such as attending events, hospitality services, insurance or health care and fueling used in restricted vehicles.
With respect to insurance and health care services for the employees and their dependents, exceptions will be available if these are related to the statutory obligation under any applicable law in the Kingdom.

10. Refund of tax to tourists (Article 73)

The term 鈥渢ourist鈥� is defined as any natural person who meets all the following conditions:
- He does not have a permanent place of residence in the Kingdom.
- He shall not be a member of the crew of a voyage, aircraft, ship or any other means of transport leaving the Kingdom.
- Any other conditions determined by ZATCA.
ZATCA will issue a list of all approved service providers for facilitating tax refunds to the tourists.
Eligible goods refer to goods purchased for personal use from an authorized supplier. Additionally, certain goods have been designated as ineligible for a tax refund.

For a detailed discussion on the impact of the amendments to the VAT Implementing Regulations on your business, please do not hesitate to contact our Tax team.

Riyadh Office

Tareq Al Sunaid

Head of Tax 鈥� Saudi Arabia

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Tax Alert: Amendments to the VAT Implementing Regulations

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