The April 2025 amendments to the VAT Implementing Regulations introduced a provision that changes the landscape of ZATCA’s post-limitation examination powers. A new clause was added to Article 64 that allows ZATCA — with the taxpayer’s consent — to examine and assess any tax return after the standard five-year limitation period has expired. This is a significant development that businesses and advisers need to understand clearly: what it means, why it matters, and when consent should or should not be given.
The New Provision: Article 64(10)
The April 2025 amendment (ZATCA Board Resolution No. 01-06-24, published 18 April 2025) added a new tenth clause to Article 64:
As an exception to what is stated in Clause (3) of this Article, ZATCA may, after the expiry of the prescribed period, conduct an examination and evaluation of any tax return, provided that the taxable person agrees to this.
Clause (3) is the standard five-year limitation. Article 64(10) creates an express exception: after the five years have passed, ZATCA may still examine — but only with the taxable person’s agreement. Without that agreement, the five-year bar stands.
This is a voluntary mechanism on both sides. ZATCA cannot compel a taxpayer to consent to a post-limitation examination. And a taxpayer cannot initiate a post-limitation examination without ZATCA agreeing to conduct it. Both parties must agree for the process to proceed.
Why This Provision Was Introduced
The commercial rationale for a consent-based post-limitation examination is straightforward: there are situations where both ZATCA and the taxable person may benefit from examining a period that would otherwise be closed.
A business conducts an internal VAT health check in 2026 and discovers it significantly overpaid VAT in 2019 — a period now outside the five-year window. Under the old framework, no mechanism existed for recovering that overpayment once the window closed. Under Article 64(10), the taxpayer may consent to a ZATCA examination of the 2019 period, which — if it confirms the overpayment — could result in a refund or credit.
ZATCA receives information in 2026 — from a third-party data source, a related-party audit, or an industry-wide compliance programme — that suggests a specific taxpayer may have underdeclared VAT in 2020. The standard five-year window has passed for periods falling in 2020 (expiring at end of 2025). Rather than pursuing the twenty-year extended window (which requires demonstrating intentional breach), ZATCA may approach the taxpayer and seek consent to examine the 2020 periods. If the taxpayer agrees, ZATCA can assess and the taxpayer can respond. If the taxpayer refuses, ZATCA cannot examine under this provision — though it may still seek to establish grounds for the twenty-year window.
The Consent Decision: When to Agree and When Not To
The consent decision is one of the most commercially consequential tax choices a business can face in post-limitation circumstances. It should never be given without a prior review of the period in question and qualified tax advice.
Considerations That Support Giving Consent
- The period likely produced an overpayment. If an internal review indicates the business overpaid VAT — through overclaimed output tax, underclaimed input tax, or incorrect rate application — consent to examination is the mechanism to recover those amounts. The alternative is to write off the overpayment permanently.
- The overpayment is material. Post-limitation examination carries administrative cost. The commercial case for consent is strongest where the expected recovery significantly exceeds the cost of the process.
- The period’s records are complete and defensible. Consenting to examination of a period with incomplete or inaccessible records exposes the business to an assessment based on ZATCA’s assumptions rather than actual figures.
Considerations That Counsel Against Giving Consent
- The period may have underpayments. A post-limitation examination is not a one-way street. If ZATCA examines a period with the taxpayer’s consent and finds underpaid tax, ZATCA can assess — with penalties. Consenting to examination of a period with potential underpayments removes the protection the five-year bar provides.
- Records for the period are incomplete. Where the six-year record-keeping obligation was not met for the period in question, a post-limitation examination may result in ZATCA making best-estimate assessments based on incomplete evidence. The taxpayer has given up the limitation bar without the documentary protection needed to defend the position.
- The examination scope is unclear. Consent to examination of one period does not automatically restrict ZATCA to finding only what the taxpayer expected. Any issues ZATCA identifies in the period — even those the taxpayer was unaware of — may produce assessments.
The provision does not specify whether consent can be withdrawn once examination has commenced. The prudent assumption is that once ZATCA has begun the examination process with the taxpayer’s agreement, the taxpayer cannot unilaterally end it. The consent decision must be made carefully before examination begins — not reconsidered mid-process.
Interaction With the New Refund-Linked Audit Window
Article 64(10) must be read alongside the new Article 69(7) added by the same April 2025 amendment. Article 69(7) provides that ZATCA may examine any tax period for which a refund claim has been submitted, within one calendar year from the date the claim was filed — without prejudice to the standard five-year and twenty-year assessment windows.
Together, these two provisions reshape the post-limitation examination landscape:
- Refund claims for periods within the five-year window: ZATCA can examine that period within one year of the refund submission, using its normal assessment powers
- Refund claims for periods outside the five-year window: Article 64(10) may provide a mechanism for ZATCA to examine the period if the taxpayer consents — the refund claim itself may serve as the implicit context for seeking consent
- ZATCA-identified issues in post-limitation periods: ZATCA must seek consent under Article 64(10) absent evidence of intentional breach or registration failure
- Article 64(10) — introduced by the April 2025 amendments — allows ZATCA to examine and assess tax returns after the standard five-year limitation period, provided the taxable person agrees.
- This is a bilateral voluntary mechanism. Neither party can compel the other. ZATCA cannot force examination. The taxpayer cannot unilaterally initiate it without ZATCA’s cooperation.
- The provision creates a mechanism for recovering overpayments in time-barred periods — a valuable tool for businesses that identify historic errors in their favour.
- Consent also removes the five-year protection for that period. If ZATCA finds underpayments, they can be assessed. Consent should only be given after a thorough internal review of the period.
- Incomplete records for the period in question make consent significantly more risky — ZATCA may make best-estimate assessments where records cannot support the actual position.
- The consent decision is effectively irrevocable once examination commences. It must be made carefully, with a full understanding of the period’s compliance position, before any examination begins.
- Article 64(10) should be read alongside the new Article 69(7) refund-linked audit window. Together they create a more active post-submission audit environment than existed before April 2025.
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