In a move aimed at supporting the continued growth the Kingdom's booming tourism industry, the Zakat Tax and Customs Authority (ZATCA) has amended its VAT regulations to introduce this significant exemption.

Effective from April 18, 2025, the updated rules stipulate a zero per cent VAT rate on eligible purchases made by tourists from approved service providers. Upon their departure from Saudi Arabia, tourists will then be able to reclaim the VAT amount they have paid.

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These updated regulations detail that eligible goods and services purchased by tourists from approved service providers will effectively have a zero percent VAT rate. ZATCA will be authorising specific service providers to manage the VAT refund process for tourists, and this means that the 15% tax initially paid when purchasing goods and services in the Kingdom, will then be refunded to tourists by these designated service providers when they leave Saudi Arabia.

In a notable point for regional travellers, tourists from Gulf Cooperation Council (GCC) countries, including residents of the UAE, will be treated the same as those from outside the GCC for VAT refund purposes, at least until the implementation of the Electronic Service Law.

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The Governor of ZATCA, Suhail bin Mohammed Abanmi, has been granted the authority to issue the necessary guidelines for this new tourist VAT refund scheme. These guidelines will provide comprehensive details on the implementation process, including defining who qualifies as a tourist, specifying which types of goods are eligible for a refund, setting minimum purchase values, outlining the criteria for businesses to become approved suppliers, and detailing the refund application process for tourists.

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Clarifications on Business VAT Regulations

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In addition to the tourist-focused changes, ZATCA has also issued important clarifications regarding VAT regulations for businesses. One key update concerns the transfer of economic activities. The authority mandates that if a taxable entity transfers its operations to another, the receiving entity must inform ZATCA within 30 days of the transfer date, unless the transferring entity has already de-registered for VAT.

Furthermore, ZATCA also emphasised the importance for businesses whose VAT registration has been cancelled to retain all necessary invoices, records, and documentation, emphasising that de-registration does not absolve them of any outstanding VAT obligations.

The amended regulations also clarify the tax implications of transferring economic activities. If a transfer fails to meet all the specified conditions, including the timely notification to ZATCA and the proper identification of the transferred goods and services, those goods and services will be considered taxable.

Overall, the introduction of VAT exemptions for tourists marks a significant step in Saudi Arabia's efforts to attract international visitors and enhance their experience within the Kingdom. The move is expected to make Saudi Arabia a more competitive destination for shoppers and travellers alike.

More information to come...
zatca.gov.sa

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