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Andersen Saudi Arabia Participates in the Zakat, Tax, and Customs Authority Conference

The Andersen Saudi Arabia team participated in the Zakat, Tax, and Customs Authority Conference, held in Riyadh under the theme “Shaping the Future for a Sustainable Economy and Enhanced Security.” The conference highlighted the most important developments in the Kingdom’s tax system and exchanged experiences on how to address future tax challenges.

This participation was a unique opportunity to confirm Andersen’s presence in the fields of tax, zakat, law, and consulting, and to explore new horizons that contribute to strengthening its role as a specialized and integrated solutions provider. The participation concluded successfully.

Decisions issued by the Zakat, Tax, and Customs Authority during the first quarter of 2025

During the first quarter of 2025, the Zakat, Tax, and Customs Authority issued several important decisions in various areas, including real estate transaction tax, value-added tax, zakat, and e-invoicing tax. These decisions are part of the ongoing modernization of tax systems in the Kingdom, aiming to enhance compliance and facilitate procedures for taxpayers.

We share with you the most prominent of these decisions so you can stay up to date with the latest amendments.

Real Estate Transactions Tax System: Issuance of the Real Estate Transactions Tax System Resolution and its Amended Implementing Regulations

The Implementing Regulations for the Real Estate Transactions Tax System were issued by Royal Decree No. (M/84) dated 19/3/1446 AH. The regulations entered into force on 10/4/2025 AD.

The regulations include definitions related to the real estate transaction tax and transactions that fall within the scope of the tax, the statute of limitations for verifying real estate transactions, real estate transactions exempt from the tax, the terms and conditions for tax exemption, the tax treatment of mergers and acquisitions, and other provisions.

System Objectives

• Facilitating the implementation of the relevant executive rules for the real estate transaction tax.
• Addressing challenges specific to the real estate sector and increasing government oversight.

Highlights of the System

• Adding real estate transactions that fall within the scope of the tax.
• Establishing a tax collection mechanism through the system’s implementation.
• Exempting real estate transactions that occurred before 2020 AD.
• Setting the tax rate at 5% on real estate transactions.

Tax Rate 5%

The same rate currently imposed on real estate transactions.

Stages of Implementing the Real Estate Transaction Tax

• 2017: Issuance of the 5% Value Added Tax (VAT) system.
• 2020: Amendment of the VAT rate to 15%.
• 2020: Exemption of real estate supplies from VAT and imposition of a real estate transaction tax.
• 2024: Issuance of a Royal Decree approving the amendment to the Real Estate Transaction Tax System.
• 2025: Effective date of the amended Real Estate Transaction Tax System and its amended executive regulations.

Value Added Tax: Resolution approving amendments to the Executive Regulations of the Value Added Tax System

Resolution of the Board of Directors of the Zakat, Tax and Customs Authority No. (01-06-24) dated 05/17/1446 AH

The Board of Directors of the Zakat, Tax and Customs Authority (the Board), based on the powers granted to it in Article (5) of the Zakat, Tax and Customs Authority Organization, issued by Cabinet Resolution No. (570) dated 09/22/1442 AH, and after reviewing Article (Fifty-Two) of the Value Added Tax System, issued by Royal Decree No. (M/113) dated 11/02/1438 AH, and its amendments, and after reviewing the Executive Regulations of the Value Added Tax System, issued by Resolution of the Board of Directors of the General Authority of Zakat and Tax (formerly) No. (3839) dated 12/14/1438 AH, and its amendments, and after reviewing Council Resolution No. (10-02- 24) Dated 9/14/1445 AH, and after reviewing Council Resolution No. (06-04-24) dated 2/12/1446 AH, and after reviewing the directive of His Excellency the Chairman of the Council at the fifth meeting of 2024 AD, the following is decided:

First: Approval of the amendments to the Executive Regulations of the Value Added Tax System, in accordance with the amended form, effective from the date of their publication in the Official Gazette (Umm Al-Qura Newspaper).

Second: The representative of the tax group registered with the Authority prior to the issuance of this resolution shall be granted a period not exceeding (180) days, starting from the date of publication of this resolution, to adjust the status of the tax group in accordance with the amendments contained in the provisions of Article (Ten) of the Executive Regulations of the Value Added Tax System referred to in Clause (First) of this resolution.

Value Added Tax: Fine Cancellation and Financial Penalty Exemption Initiative

The Zakat, Tax, and Customs Authority has issued a guidance manual to clarify some of the procedures related to the application of the regulatory provisions in effect on the date of its issuance. The content of this guide does not constitute an amendment to any of the provisions of the laws and regulations in force in the Kingdom.

The Authority affirms its application of the explanatory procedures contained in this guide, where applicable, considering the relevant regulatory texts. If any clarification or content contained in this guide is amended to reflect an unamended regulatory text, the updated explanatory procedures will apply to transactions made after the date of publication of the updated version of the guide on the Authority’s website.

The Fines Cancellation and Financial Penalties Exemption Initiative

This is a development incentive initiative launched by the Zakat, Tax, and Customs Authority (ZTAC) to limit and mitigate the economic and financial impacts of the COVID-19 pandemic in the Kingdom of Saudi Arabia. The initiative included the cancellation of all financial penalties imposed on taxpayers during the pandemic. The initiative was implemented in accordance with specific conditions and was valid for a period of six months (from June 1, 2022, to November 30, 2022). The Authority subsequently announced its extension (from December 1, 2023, to May 31, 2023). (The Authority then announced the extension of the initiative until June 30, 2025.)

Fines Covered by the Initiative

The initiative to cancel fines and exempt from financial penalties included several cases, including: exemption from income and withholding taxes, value-added tax, excise tax, real estate transaction tax, and field control violations related to electronic invoicing provisions. It also included exemption from fines for correcting VAT returns, fines for late registration in tax systems, and fines for late submission or failure to file tax returns.

Fines Not Covered by the Initiative

The initiative to cancel fines and exempt from financial penalties identified some cases not covered by the amnesty, such as: fines paid before the initiative began, fines related to tax evasion violations, and fines for failure to pay the original tax agreed upon at the end of the initiative period according to a carefully considered installment plan. Mechanism and Conditions for Benefiting from the Initiative.

Benefiting from the initiative to cancel fines and exempt from financial penalties is achieved based on several conditional steps on the part of the taxpayer, including registering in the tax system for non-registered individuals, specifying the date of registration in advance, disclosing all taxes and returns that must be submitted to the Authority, and paying the principal financial debts related to tax returns. These can be paid in installments according to specific conditions, namely: submitting an installment request to the Authority, reviewing and approving the request, and committing to paying all amounts due based on an installment plan approved by the Authority.

Third: As an exception to Clause (First) of this Resolution, the provisions stipulated in Paragraph (3) of Article (47) of the Executive Regulations of the Value Added Tax System referred to in Clause (First) of this Resolution shall be effective from January 1, 2026.

Fourth: This Resolution shall be published in the Official Gazette and communicated to those concerned for implementation.

Zakat: Decision to Implement the New Executive Regulations for Zakat Collection for Years Prior to January 1, 2024

Amending the Period Specified in Paragraph (d/1) of Clause (Fourth) of Ministerial Resolution No. (1007) Regarding the Implementation of the Provisions of the Executive Regulations for Zakat Collection

Decision:

The Minister of Finance

Based on the powers granted to him

And based on the Zakat Collection System, issued by Royal Decree No. (17/2/28/8634) dated June 29, 1370, AH, and its amendments.

Pursuant to Royal Decree No. (M/40) dated 2/7/1405 AH, stipulating the full collection of zakat from all companies, institutions, and others subject to zakat, and Cabinet Resolution No. (126) dated 2/30/1436 AH, which stipulates in Clause (Second) the authorization of the Minister of Finance to issue the necessary decisions to implement the Royal Decree No. (M/40),

After reviewing the operating rules of the Zakat, Tax, and Customs Committees, issued by Royal Order No. (25711) dated 4/8/1445 AH, and the Executive Regulations for Zakat Collection, issued by Ministerial Resolution No. (1007) dated 8/19/1445 AH, and Clause (Fourth) of the same resolution

And based on what the public interest requires.

The following is decided:

First: Amending the period mentioned in Paragraph (d/1) of Clause (Fourth) of Ministerial Resolution No. (1007) dated 8/19/1445 AH, which stipulated the following: “The application shall be submitted within a period not exceeding (60) days from the date of publication of this resolution,” to be as follows: “The application shall be submitted within a period not exceeding 4/30/2025 AD.”

Second: This resolution shall be communicated to those concerned for implementation and shall be enforced starting from the date of its publication in the Official Gazette.

Commerce: Commercial Registry and Trade Names Laws Go into Effect Today

The Ministry of Commerce announced the entry into force of the Commercial Registry and Trade Names Laws and their implementing regulations as of today, April 3, 2025, AD, corresponding to Shawwal 5, 1446 AH. Services provided to the business sector related to the two laws will resume after being developed to keep pace with the legislative aspects of the two laws.

This comes as a continuation of the development of the legislative system that enhances the practice of business, keeping pace with economic and technological developments, and the transformation witnessed by the Kingdom under Vision 2030.

The Commercial Registry Law facilitates the practice of business by regulating registration procedures in the Commercial Registry, ensuring transparency and reliability through the accuracy and validity of the data recorded in the registry, periodically updating it, and making it easily searchable and accessible.

The Law provides a single commercial registry for each establishment across the Kingdom, covering all its activities, and eliminates the issuance of sub-registries for sole proprietorships and companies, thus contributing to reducing the financial burden on commercial establishments.

The system introduced a requirement for annual electronic verification of registration data in the commercial register, replacing the established practice of renewing the register. It also requires merchants to verify their registration data annually every 12 months from the date of issuance. Registration in the commercial register and related services are suspended if the annual verification is not submitted within (90) days of the due date. Registration in the commercial register is automatically deleted from the commercial register one full year after the suspension begins if the merchant does not submit a request to lift the suspension within this period, submit the annual verification, pay the prescribed fee, and pay the prescribed fine.

The system also requires the opening of bank accounts linked to the commercial establishment to enhance its reliability. The merchant is obligated to issue licenses to practice the activity registered in the commercial register within (90) days, unless the licensing authority stipulates a longer period.

It also granted a grace period of (5) years to correct the status of existing sub-registries for institutions and companies. It also established a path for alternative penalties, including warning the merchant, obligating him to take the necessary steps to avoid the occurrence of the violation in the future, obligating him to take corrective steps to address the effects of the violation, or issuing a decision to correct the data recorded in the commercial register.

For its part, the Trade Names Law and its implementing regulations enhance confidence in the commercial environment by regulating the procedures for reserving and registering trade names in the commercial register, enhancing their value, and ensuring their protection and the rights associated with them.

The law allows the reservation of a trade name before registration for a specified period (extendable once), subject to specific controls, and a list of the trade names prohibited from registration.

It expanded the scope of trade name registration by allowing the name to be in Arabic, Arabized, or English words, or composed of letters or numbers.

The law also allows the trade name to be disposed of independently of the establishment. The regulation prohibits the registration of any trade name for an establishment if it is like the name of another establishment, even if the activity is different. This comes within the framework of protecting names and promoting transparency and competitiveness in the commercial environment.

The regulation also specifies controls for reserving or registering family names, the personal name of a merchant, the name of Saudi Arabia, and the names of cities, regions, and public places as trade names.

The Commercial Registry and Trade Names Regulations, along with their implementing regulations, can be found at: https://mc.gov.sa/ar/Regulations.

Electronic Invoicing: Implementing the Linkage and Integration Phase of Electronic Invoicing

The Zakat, Tax, and Customs Authority (ZTAC) has set the criteria for selecting targeted establishments in the twenty-second group to implement the “Linkage and Integration” phase of electronic invoicing.

The Authority explained that the twenty-second group includes all establishments whose value-added tax revenues exceed one million riyals during the years 2022, 2023, or 2024.

The Authority explained that it will notify all targeted establishments in the twenty-second group, in preparation for linking and integrating their electronic invoicing systems with the Futura system before December 31, 2025.

The Zakat, Tax, and Customs Authority added that the second phase (the Linkage and Integration Phase) requires additional requirements compared to the first phase (the Issuance and Retention Phase). The most notable of these requirements is linking taxpayers’ electronic invoicing systems with the Fatura system and issuing electronic invoices based on a specific format. A number of additional elements are included in the invoice. It also indicated that the second phase (linking and integration) will be implemented gradually and in groups, with the authority notifying the remaining groups directly at least six months before the linking date.

The Zakat, Tax and Customs Authority indicated that the second phase of e-invoicing is an extension of the economic renaissance and digital transformation witnessed by the Kingdom, and a continuation of the success story that began with the first phase of e-invoicing implementation, which achieved numerous positive results, most notably raising the level of consumer protection across the Kingdom. The authority praised the high awareness it witnessed among taxpayers and their rapid response in implementing the first phase of the project. It is noteworthy that the first phase of the e-invoicing project (the issuance and storage phase) began implementation on December 4, 2021. This phase requires taxpayers subject to the e-invoicing regulations to completely stop using handwritten invoices or invoices written on computers using word processing or number analysis programs. They must also ensure that a technical solution for e-invoicing is in place that is compatible with the Authority’s requirements. They must also ensure that e-invoices are issued and stored with all elements, including the QR code and other requirements.

Finally,

We at Andersen Saudi Arabia are proud to have a team of specialized and experienced consultants in various fields of tax and zakat. We are always at the forefront of tax developments, constantly monitoring the latest decisions and amendments issued by the Authority and ensuring our compliance. Our consultants have extensive experience, enabling them to provide accurate and effective solutions that ensure your business aligns with the ongoing changes in the tax system. We look forward to helping you achieve excellence and full compliance with the new tax regulations, and we invite you to contact our team of experts for professional advice that meets your needs.