Blog

ZATCA can now conduct Examinations With Taxpayer Consent after the Limitation Period
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.

01
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:

Article 64(10) — New Clause

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.

02
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.

Scenario A — Taxpayer-Initiated: Significant Overpayment Identified

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.

Scenario B — ZATCA-Initiated: Information Emerges Late

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.
03
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.
⚠ Consent Is Not Reversible Once ZATCA Begins Examining

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.
04
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
Key Takeaways
1. 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.
2. 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.
3. The provision creates a mechanism for recovering overpayments in time-barred periods — a valuable tool for businesses that identify historic errors in their favour.
4. 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.
5. 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.
6. 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.
7. 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.
May 26, 2026

How ZATCA Conducts VAT Audits: Your Rights and Obligations

A ZATCA audit is not a surprise inspection with arbitrary powers. It operates within a defined legal framework — specific notice requirements, specific access rights, specific obligations on the business. Understanding that framework before an audit arrives is the difference between a managed process and an uncontrolled one.

The Legal Basis for Examinations

Article 64(6) of the VAT Implementing Regulations governs the conditions under which ZATCA conducts examinations. The article imposes obligations on both the authority and the taxable person — creating a structured framework that must be followed by both sides.

The starting point: taxable persons are obligated to cooperate with any examination carried out by ZATCA. This is not optional, and refusal to cooperate is itself a basis for ZATCA to conduct an unannounced visit.

The Notice Requirement — and When It Doesn’t Apply

The standard rule: ZATCA must issue notice twenty (20) days before the first date of the examination. The examination may be conducted at the taxable person’s premises or at ZATCA’s own premises.

The exception: ZATCA may conduct an examination without prior notice in either of these circumstances:

ZATCA has good reason to suspect a violation of the Law or Regulations
A refusal to cooperate by the taxable person has occurred or is likely to occur

The without-notice power is not unlimited — it requires ZATCA to have good reason to suspect a violation, not merely to prefer a surprise visit. But the threshold for “good reason” is determined by ZATCA, and businesses that have been flagged through risk-based scoring or third-party data signals are more likely to face unannounced examinations.

Third-Party Information Access

Under Article 56, ZATCA has the right to obtain information from third parties — including government entities, banks, and financial institutions regulated by SAMA or the Capital Market Authority. Banks cannot withhold account information on ZATCA’s request. This means ZATCA can cross-reference a business’s bank statements, payment records, and financial flows against declared VAT returns before ever arriving for an examination. The audit often starts well before the business knows it is being reviewed.

During the Examination: Rights and Obligations

Once an examination begins at the business’s premises, Article 64(6) sets the operational conditions:

The examination is conducted during the taxable person’s working hours
The taxable person must make available all invoices, books, records, and accounting documents required to be kept under the Law and Regulations
Documents may be examined on or off the premises
Where records are kept electronically, the taxable person must provide physical copies or electronic files on ZATCA’s request
ZATCA employees may visit any premises of the taxable person to verify compliance

Where a taxable person fails to cooperate fully, ZATCA may take additional measures to obtain records — and may temporarily seize documents if it has reason to believe they may be hidden, damaged, or tampered with. Where a violation is suspected, ZATCA may conduct a search and collect evidence.

Document Return After Examination

Article 64(6)(e) provides that ZATCA must return any transferred documents to the taxable person within twenty (20) days from the end of the examination — unless ZATCA retains copies, which it may do where necessary.

What Triggers a ZATCA Audit

ZATCA does not publish its audit selection criteria, but the following patterns are known to elevate audit risk:

Risk Factor	Why It Attracts Attention
Persistent VAT refund positions	Large or regular refund claims are scrutinised under the new Article 69(7) one-year audit window
Inconsistency between return data and third-party information	Bank data, supplier reporting, and e-invoicing data create cross-reference points ZATCA can compare against filed returns
Missing or late returns	Non-filers attract best-estimate assessments and follow-up examinations
Significant changes in reported figures across periods	Unusual spikes or drops in output or input tax without obvious explanation raise risk flags
Sectors with historically high compliance issues	Construction, real estate, financial services, and cross-border service businesses are frequently selected
E-invoicing data mismatches	Phase 2 e-invoicing integration gives ZATCA real-time invoice data to compare against return figures

How to Prepare — Before the Notice Arrives

Maintain a complete, accessible document archive. Six-year minimum retention, all records in Arabic, electronically accessible on demand — as required by Article 66.
Reconcile e-invoice data against filed returns. ZATCA’s platform has your invoice data. Your returns must be reconcilable to that data. Any gap will be identified.
Conduct a reverse charge completeness review. One of the most common audit findings is missing RCM output tax. A reconciliation of all foreign service invoices against declared RCM output tax should be a standard pre-audit exercise.
Ensure proportional deduction calculations are documented. For businesses with exempt supplies, the partial exemption methodology must be defensible and applied consistently.
Identify and correct known errors voluntarily. Voluntary correction before audit identification is treated more favourably under ZATCA’s penalty framework. Waiting for ZATCA to find an error that is already known internally is the costliest approach.

Key Takeaways

ZATCA must give 20 days’ notice before examining a business at its premises — except where it has good reason to suspect a violation or expects non-cooperation.
Taxpayers are legally obligated to cooperate with ZATCA examinations and must make all records available on request.
ZATCA has broad third-party information access — including bank records and financial institution data — that it can use to cross-reference declared returns before arriving for examination.
ZATCA may temporarily seize documents where it suspects they may be hidden, damaged, or tampered with. Seized documents must be returned within 20 days of examination completion.
Submitting a refund claim now triggers a specific one-year audit window for that period under Article 69(7).
e-Invoicing Phase 2 gives ZATCA near-real-time invoice data — making return-to-invoice reconciliation a standard audit tool.
Voluntary correction before audit detection is treated more favourably than assessed errors. The best audit preparation is having nothing material left to find.

May 26, 2026

Correcting VAT Return Errors

Errors in filed VAT returns are not exceptional — they are an expected reality in any business with complex transactions. What separates a managed compliance position from a penalty exposure is the response: how quickly the error is identified, which correction route applies, and whether the process is executed correctly. The April 2025 amendments to Article 63 refined each of these routes in ways that change the practical steps required.

The Three Correction Routes

Article 63 of the Implementing Regulations establishes three distinct correction mechanisms. Which applies depends on whether the error produced an understatement or overstatement of tax, and — for understatements — whether the net difference falls above or below SAR 15,000.

Error Type	Net Tax Difference	Correction Route	Deadline
Understatement (too little tax declared)	SAR 15,000 or more	Route 1 — notify ZATCA by correcting the prior return	20 days from knowledge
Understatement (too little tax declared)	Below SAR 15,000	Route 3 — fold into the next return	Next filed return after discovery
Overstatement (too much tax declared)	Any amount	Route 2 — adjust in any subsequent return	Within 5 years of the period end

Route 1: Understated Tax Above SAR 15,000 — The 20-Day Obligation

Where a filed return has resulted in the net tax due being understated by SAR 15,000 or more, the taxable person must notify ZATCA within twenty (20) days of becoming aware of the error. Notification is made by correcting the previously submitted return.

The April 2025 amendment to Article 63(1) refined the language to focus on the net tax due — specifically, that the taxable person has reported an amount less than the net tax they were required to report. The correction is made to the previously submitted return, not through a new return for a different period.

⚠ When Does the 20-Day Clock Start?

The clock starts from the date of knowledge — not the date of the original error, and not the date of formal discovery through a ZATCA audit. If a business identifies the error internally during a review in March for a return filed in January, the 20-day clock starts in March. Knowledge can also be constructive: Article 63(1) specifies that the obligation applies where the person “becomes aware of such facts which should have led it to be aware of” the error. Wilful ignorance does not pause the clock.

What Constitutes an Understatement

An understatement of tax arises from: declaring too little output tax (missing supplies, wrong rates, missed reverse charge); claiming too much input tax (non-compliant invoices, excessive RCM input recovery, overclaimed proportional deduction); or a combination of both. The relevant figure is the net tax difference — output tax shortfall plus input tax overclaim — across all affected periods.

Route 3: The SAR 15,000 Threshold — And How 2025 Changed It

The exception in Article 63(3) allows an understated error with a net tax difference below SAR 15,000 to be corrected without the formal 20-day notification process. Instead, the correction is folded into the next return.

Before April 2025, the provision simply said the correction could be made in the “following tax return.” The April 2025 amendment added specificity: the correction must be incorporated into the net tax due in the return for the tax period during which the error was discovered.

What This Means in Practice

A business filing quarterly discovers in September (Q3) that its Q2 return understated tax by SAR 8,000. Under the pre-2025 rule, it could fold this into the Q3 return — which was the “following” return. Under the 2025 amendment, the correction must appear in the Q3 return because that is the return for the period in which the error was discovered (Q3: July–September). The practical outcome is the same — the Q3 return — but the framing is now tied to the discovery period, not simply the next return filed.

The SAR 15,000 Is a Net Figure

The threshold applies to the net tax difference — the combination of output tax understatement and input tax overclaim across all affected periods. A business that finds separate errors in three different quarters, each below SAR 15,000 individually, must assess whether they aggregate to SAR 15,000 or more in total. The Regulations refer to the net tax difference resulting from the error — if multiple errors relate to a single understatement event, the aggregate matters.

Route 2: Overstated Tax — Correct in Any Subsequent Return

Where an error resulted in the taxable person declaring more net tax than required — too much output tax, too little input tax — the correction is more flexible. Article 63(2) permits the business to correct the error by incorporating the adjustment (as a deduction) into the net tax due in any subsequently filed return.

The April 2025 amendment to Article 63(4) clarified the limitation period: no correction relating to an error that resulted in a declaration of net tax due that exceeds what should have been declared may be made after five years from the end of the calendar year in which the relevant tax period falls.

This is an important clarification. The prior wording referred to corrections relating to a “refund request” — which was narrower and potentially ambiguous. The 2025 version correctly captures all overstatement corrections within the five-year window, regardless of whether they also involve a refund.

What a Correction Submission Must Contain

Article 63(5) sets out the minimum content for any correction submitted to ZATCA. A correction that does not contain all three elements is incomplete:

The tax period or periods to which the returns being corrected relate
The amount of output tax and input tax being corrected in respect of each period
An explanation of the reason for the error or incorrect information in the return

The reason explanation is not a formality. A correction that simply states “miscalculation” without identifying the type of error, the transactions involved, and the basis of the correction is unlikely to be accepted without follow-up queries from ZATCA. The explanation should be specific, factual, and cross-referenced to the relevant invoices or transaction records where applicable.

Example Correction Explanation — Good Practice

“During Q2 2025, the reverse charge mechanism was not applied to three invoices received from a non-resident software provider (Supplier X). The total value of those invoices was SAR 280,000. The resulting output tax understatement is SAR 42,000 (15% of SAR 280,000). The corresponding input tax of SAR 42,000 should have been simultaneously claimed. The net additional tax due is zero, but the output tax disclosure in the Q2 2025 return was understated by SAR 42,000.”

Key Takeaways

Understated tax of SAR 15,000 or more must be notified to ZATCA within 20 days by correcting the original return. This is a mandatory obligation from the moment of knowledge.
Understated tax below SAR 15,000 may be folded into the return for the period in which the error was discovered — not any subsequent return, as clarified in the April 2025 amendment.
Overstated tax may be corrected in any subsequently filed return, within five years of the end of the calendar year in which the relevant period falls.
The SAR 15,000 threshold applies to the net tax difference across all affected periods — individual and aggregate impacts both matter.
The 20-day clock starts from the date of knowledge — including constructive knowledge where facts should have led to awareness of the error.
Every correction must identify the periods affected, the output tax and input tax amounts corrected for each, and an explanation of the error. Incomplete corrections will generate ZATCA queries.
Voluntary correction before ZATCA identifies the error through audit is treated more favourably under the penalty framework. Early action matters.

May 26, 2026

Tax Periods: Monthly vs. Quarterly — Who Qualifies for Each

The tax period — monthly or quarterly — determines how often a business files VAT returns and how quickly it must report and pay VAT. For most businesses, it is set automatically based on their supply volume. But the rules contain important election provisions, switching conditions, and ZATCA override powers that every finance team should understand before assuming their filing frequency is fixed.

The Two Tax Periods and the Threshold

Article 58 of the Implementing Regulations is built around a single threshold: SAR 40 million in annual taxable supplies during the previous twelve months.

Annual Taxable Supply Value (Prior 12 Months)	Mandatory Tax Period	Election Available?
Exceeds SAR 40 million	Monthly	No — mandatory, no election to quarterly
SAR 40 million or below	Quarterly (3 months)	Yes — may apply for monthly

The threshold is assessed on a rolling twelve-month basis — it is not a calendar-year test but a prior-twelve-months test at any point in time. A business that exceeds SAR 40 million in supplies during any twelve-month period must move to monthly filing. The mechanism for this change is set out in Article 58(7): ZATCA issues a notification specifying the effective date.

⚠ The Threshold Is Supply Value — Not Revenue

The SAR 40 million threshold is measured against the value of taxable supplies — not total revenue. Exempt supplies do not count toward the threshold. A business with SAR 60 million total revenue but SAR 35 million in taxable supplies and SAR 25 million in exempt supplies is below the threshold. Conversely, a business with SAR 40 million in taxable supplies and significant exempt supply revenue is at the threshold. The calculation must be done correctly.

Electing Monthly When Below the Threshold

A taxable person whose annual taxable supplies do not exceed SAR 40 million may nonetheless apply to ZATCA to use a monthly tax period (Article 58(3)). Upon approval, ZATCA issues a notification specifying the effective date — which is the start of the next tax period following the period in which approval is granted (Article 58(4)).

Why Would a Business Elect Monthly?

Cash Flow Advantage for Exporters and Zero-Rated Businesses

A business that regularly generates VAT refunds — for example, an exporter whose output supplies are largely zero-rated but who incurs significant input VAT on domestic costs — benefits commercially from monthly filing. Monthly returns mean refund claims are submitted and processed more frequently, improving cash flow compared to quarterly claims that build up three months of credit before being recovered.

Compliance Risk Reduction

Some businesses prefer monthly filing to keep their VAT position closely monitored. A monthly close process forces discipline in invoice processing, RCM calculation, and input tax verification — reducing the risk of a large correction requirement accumulating over a full quarter.

Reverting From Monthly to Quarterly

A business that has been on monthly filing is not locked in permanently below the threshold. Article 58(5) permits an application to revert to a three-month period, subject to two conditions:

The taxable person must have used the monthly period for at least two years
Their annual taxable supply value during the preceding twelve months must not exceed SAR 40 million at the time of application

Upon approval, ZATCA issues a notification with the effective date — again, the start of the next tax period following approval (Article 58(6)).

ZATCA Can Direct the Period

Article 58(7) gives ZATCA the power to direct a taxable person to use a specific tax period by notification, specifying the effective date. This is not a commonly exercised power but it exists — and overrides any election made by the taxable person. Businesses that receive such a notification must comply from the effective date stated, regardless of their own preference.

Practical Implications of Period Choice

Factor	Monthly Filing	Quarterly Filing
Filing frequency	12 returns per year	4 returns per year
Cash flow for refund businesses	Better — claims processed more frequently	Slower — three months of credit builds up
Cash flow for net payment businesses	More frequent outflows	Larger but less frequent payments — more float time
Administrative burden	Higher — monthly close required	Lower — quarterly cycle
Compliance discipline	Stronger — errors found and corrected sooner	Lower frequency — errors may accumulate

Key Takeaways

Businesses with annual taxable supplies exceeding SAR 40 million in the prior twelve months must file monthly — this is mandatory with no election to quarterly.
Businesses at or below the SAR 40 million threshold default to quarterly but may elect monthly by application to ZATCA.
The threshold is measured on taxable supplies only — exempt supply revenue does not count toward the SAR 40 million.
Monthly filers who have been on that period for at least two years, and remain below the threshold, may apply to revert to quarterly filing.
All period changes take effect from the start of the next tax period following ZATCA’s approval notification — not immediately from approval.
ZATCA may direct a business to use a specific tax period at its discretion under Article 58(7), overriding any existing election.
Exporters and zero-rated businesses with regular refund positions should evaluate monthly filing — the cash flow benefit from faster refund cycles often outweighs the administrative burden.

May 26, 2026

Filing Your VAT Return: Deadlines, Format, and What to Include

Filing the VAT return is the most regular formal act in Saudi VAT compliance. Done correctly, it crystallises the period’s net position and satisfies the obligation. Done incorrectly — wrong boxes, missing disclosures, wrong period — it plants errors that ZATCA will find on audit, often years later. This article covers what the return must contain, when it is due, and what happens if it is not filed.

The Filing Deadline

Article 62(1) of the Implementing Regulations is unambiguous on timing: the VAT return for each tax period must be filed no later than the last day of the month following the end of the tax period.

Tax Period	Period Ends	Return and Payment Due
January (monthly filer)	31 January	28/29 February
Q1: January–March (quarterly filer)	31 March	30 April
Q2: April–June (quarterly filer)	30 June	31 July
Q3: July–September (quarterly filer)	30 September	31 October
Q4: October–December (quarterly filer)	31 December	31 January

The tax payment is due on the same date as the return. Filing without paying, or paying after the deadline, triggers late payment penalties — even if the return is submitted on time. An extension of time to pay may be requested under Article 60, but approval is not automatic and does not suspend penalty accrual for the extension period.

⚠ Weekend and Public Holiday Rule

Article 74 of the Implementing Regulations provides that where any obligation falls due on a non-working day, it is extended to the next working day. This applies to filing and payment deadlines. Businesses should confirm the exact deadline for each period, particularly around national holidays and long weekends, and not assume a fixed date in every month.

What the Return Must Include

A validly filed return constitutes the taxable person’s self-assessment of tax due for the period. Article 62(2) specifies the disclosures required. These are not optional fields on a form — they are mandatory disclosures with direct audit and penalty consequences if incorrectly populated or omitted.

Return Field	What It Captures
Standard-rated and zero-rated supplies	Total value of all taxable supplies (both rates) and total output tax on those supplies
Purchases and input tax	Total value of all goods and services received, and total deductible input tax
Nominal supplies	Total value of deemed/nominal supplies made in the period
Reverse charge supplies	Total value of supplies received subject to the reverse charge mechanism and the related output tax
Internal supplies	Total value of intra-GCC supplies made in the period
Import tax	VAT on imports reported through the return, and input tax on those imports
Exempt supplies	Total value of exempt supplies made in the period
Input tax adjustments	Adjustments under Article 51 (proportional deduction) or Article 52 (capital asset adjustment)
Prior period corrections	Any corrections to previous returns made through this return under Article 63(2) or (3)

⚠ The Reverse Charge Field Is Commonly Blank — It Should Not Be

The reverse charge mechanism field is one of the most consistently incomplete disclosures in Saudi VAT returns. Businesses procuring services from non-resident suppliers must self-assess output tax on those supplies and report it here. Leaving this field blank when foreign service invoices have been received is an output tax understatement in every period it occurs.

Self-Assessment: What the Filed Return Means Legally

A validly filed VAT return is the taxable person’s self-assessment of the tax due for that period. This has two important implications.

First, the return creates a legal record that ZATCA can examine, challenge, and assess against. If the self-assessment is incorrect, ZATCA can issue an assessment for the difference — with penalties — for up to five years (or twenty in the extended window cases).

Second, where a taxable person fails to file, ZATCA has the right under Article 62(1) to issue a best-estimate assessment of the tax properly due. This assessment is raised without the benefit of the taxpayer’s actual figures, and is typically conservative — meaning it will likely overstate the liability. The taxable person remains obligated to file the outstanding return regardless, and the best-estimate assessment can be withdrawn once the actual return is filed (Article 64(5)).

Best Practice: File Even If You Cannot Pay

A business that cannot afford to pay its VAT liability by the deadline should still file the return on time. Filing without paying triggers a late payment penalty on the unpaid amount. Not filing triggers both the late filing penalty and a best-estimate assessment — which will be based on ZATCA’s estimate rather than the actual figures, and may significantly overstate the liability. Filing and then seeking an installment arrangement under Article 60 is the correct approach.

Cash Accounting: The Optional Alternative

Article 46 permits eligible taxable persons to prepare their VAT return on a cash accounting basis rather than the standard invoice accounting basis. Under cash accounting, output tax and input tax are included in the return only to the extent that payment has actually been made or received — not when the supply or invoice takes place.

Eligibility conditions include: annual taxable supplies in the prior calendar year must not exceed SAR 5 million, the same value is expected for the current year, and the business must not have received a VAT violation notification in the preceding twelve months.

The cash basis must be applied for both output tax and input tax consistently — a business cannot apply it selectively to one side of the return only. Any switch from invoice basis to cash basis must be applied at the start of a tax period following approval, and requires the first cash-basis return to include an adjustment to account for the transition.

The Five Most Costly Return Errors

Omitting reverse charge output tax. Every foreign service payment from a non-resident supplier triggers an output tax self-assessment. Missing this in every return for years produces a compounding understatement.
Reporting exempt supplies in the wrong field. Exempt supplies must be disclosed separately in the exempt supply field — not netted against taxable supplies or omitted entirely. Omission distorts the proportional deduction calculation.
Claiming input tax without a compliant invoice. Input tax can only be deducted where the taxable person holds a compliant tax invoice. Claims backed by simplified invoices, receipts, or non-compliant documents are denied on audit.
Including prior period corrections without disclosure. Where corrections to prior returns are folded into the current return, they must be disclosed in the correction field. Folding corrections silently into the output or input lines without disclosure creates an audit discrepancy.
Late filing without an extension request. Late filing penalties are assessed automatically. If a business knows it will file late, seeking an approved extension under Article 60 at least prevents the default assessment and may reduce penalty exposure.

Key Takeaways

The VAT return is due on the last day of the month following the end of the tax period. Payment is due on the same date.
If the due date falls on a non-working day, it extends to the next working day under Article 74.
The filed return is a legal self-assessment. Incorrect self-assessments can be assessed by ZATCA with penalties for up to five years (or twenty in extended window cases).
Where no return is filed, ZATCA issues a best-estimate assessment. Filing the outstanding return can trigger withdrawal — but does not automatically cancel it.
The reverse charge mechanism field must reflect all self-assessed output tax on foreign service purchases. Leaving it blank while foreign invoices have been received is an understatement.
Exempt supplies must be reported in their dedicated field — omission distorts the proportional deduction calculation and creates an audit discrepancy.
Cash accounting is available for businesses with taxable supplies not exceeding SAR 5 million — but requires ZATCA approval and applies consistently to both output and input tax.

May 26, 2026

VAT Returns, Assessments, and ZATCA Audits: What Every Business Must Know

Filing a VAT return is one of a registered business’s most visible and regular obligations. But it is also the source of the most persistent compliance failures in Saudi Arabia — wrong periods, missing disclosures, uncorrected errors, and misunderstood refund mechanics. When those failures accumulate, they become what ZATCA finds on audit. This guide covers the full lifecycle: from filing mechanics to assessment powers, from error correction to the expanded 2025 audit rules.

Filing Mechanics: What, When, and How

Under Article 62(1) of the Implementing Regulations, the VAT return for each tax period must be filed — by the taxable person or an authorised representative — no later than the last day of the month following the end of the tax period. A validly filed return constitutes the taxable person’s self-assessment of the tax due for that period.

The return must disclose, at minimum:

The total value of all taxable supplies (standard-rated and zero-rated) and total output tax
Total goods and services received and total deductible input tax
Total nominal supplies
Total supplies subject to the reverse charge mechanism
Total internal supplies
Tax on imports reported through the return
Total exempt supplies
Any input tax adjustments under Articles 51 or 52
Any corrections to prior returns included in the current return

Where a taxable person fails to file, ZATCA has the right to issue a best-estimate assessment for the period. Filing the outstanding return does not cancel the assessment automatically — ZATCA must withdraw it — but Article 64(5) confirms that a filed return can trigger withdrawal.

⚠ Payment Due at the Same Time as Filing

Under Article 59, the tax payable for a period is due by the last day of the month following the end of the period — the same deadline as the return. Filing without payment, or paying late after filing, triggers late payment penalties. An extension of time to pay can be requested under Article 60 — but it does not suspend penalty liability for the extension period.

Tax Periods: Monthly vs. Quarterly

Article 58 sets out the tax period rules with precision:

Annual Taxable Supply Value	Default Tax Period	Option to Change?
Exceeds SAR 40 million in previous 12 months	Monthly — mandatory	No
SAR 40 million or below	Quarterly (3 months)	Yes — may apply for monthly
Monthly filer for 2+ years, below SAR 40m threshold	Monthly	Yes — may apply to revert to quarterly

A business above the SAR 40 million threshold must file monthly — there is no election to the contrary. ZATCA can also direct a taxable person to use a specific tax period by notification (Article 58(7)).

Correcting Errors: The Three-Route Framework

Article 63 establishes a three-route framework for correcting filed returns, based on the nature and size of the error:

Route 1 — Understatement of Tax (Any Amount): 20-Day Obligation

Where an error has resulted in the tax due being understated — too little output tax declared, too much input tax claimed — the taxable person must notify ZATCA within twenty (20) days of becoming aware of the error by correcting the previously submitted return.

The April 2025 amendment refined this provision: the obligation is framed as notifying ZATCA by correcting the previously submitted return, within 20 days of knowledge. This is a mandatory obligation, not a discretionary one.

Route 2 — Overstatement of Tax: Correct in Any Subsequent Return

Where an error resulted in the tax due being overstated — too much output tax declared, too little input tax claimed — the taxable person may correct that error by adjusting the net tax in any return filed subsequent to discovery. This is subject to the five-year limitation in Article 63(4), as amended in April 2025 to refer specifically to overstatements of net tax declared.

Route 3 — The SAR 15,000 Exception: Correct in the Next Return

As an exception to Route 1, where an understated error produces a net tax difference of less than SAR 15,000, the taxable person may correct it simply by adjusting the net tax in the immediately following return. No separate 20-day notification is required.

The April 2025 amendment refined this: the sub-threshold error must be incorporated into the tax return for the period in which the error was discovered — not in any subsequent return, but specifically the one for the discovery period.

What a Correction Submission Must Contain

Article 63(5) specifies the minimum information any correction must provide: the tax periods being corrected, the amounts of output tax and input tax being corrected for each period, and an explanation of the reason for the error. A correction submission without this information is incomplete.

ZATCA’s Assessment Powers

Under Article 64, ZATCA may assess a taxable person’s VAT obligations for one or more tax periods. An assessment must show, at minimum: the net tax payable, the payment due date, the basis of calculation, and the taxable person’s appeal rights.

The general limitation period is five years from the end of the calendar year in which the tax period falls (Article 64(3)). But Article 64(4) extends this to twenty years in two circumstances: where a transaction was carried out with the intention of breaching the Law or Regulations, or where a person was required to register but failed to do so.

The April 2025 amendment added Article 64(10): as an exception to the five-year rule, ZATCA may — after the expiry of the prescribed limitation period — conduct an examination and assessment of any tax return, provided the taxable person agrees to this. This is a significant new provision that changes the dynamic in situations where the limitation period has passed but both parties may benefit from examination.

⚠ The 20-Year Window Is Not Theoretical

ZATCA’s ability to assess for twenty years in cases of intentional breach or registration failure is not a dormant provision. For businesses that operated unregistered for significant periods, or that structured transactions to avoid VAT, the exposure window is four times the standard period. Tax liabilities from 2018 onward could still be assessed well into the 2040s under the extended window.

How ZATCA Audits Work

Article 64(6) sets out the examination conditions. ZATCA conducts examinations at the taxpayer’s premises or at ZATCA’s own premises, on 20 days’ advance notice. The examination occurs during the business’s working hours, and the taxable person must make all invoices, books, records, and accounting documents available.

ZATCA may conduct an examination without notice where it has good reason to suspect a violation of the Law or these Regulations, or where a refusal to cooperate has occurred or appears likely.

Article 56 gives ZATCA a broad right to obtain information — including from third parties such as government entities, banks, and financial institutions regulated by SAMA or the Capital Market Authority. Banks cannot withhold account information requested by ZATCA under this provision.

Refunds: The Standard Mechanics

Under Article 69, a taxable person may request a VAT refund where excess input tax has accumulated. The request can be made at the time the return is filed or at any other time within five years from the end of the calendar year to which the circumstances relate. Key conditions:

A refund request cannot be submitted where any tax returns are outstanding and unfiled
ZATCA must conclude refund procedures and initiate payment within sixty (60) days of approving the request
Payment is made by bank transfer to the registered bank account
ZATCA may request additional information from the taxpayer during its review

The April 2025 amendment to Article 69(5) expanded the offset power: ZATCA may now set off amounts due to be refunded against any tax, penalty, or other amounts due under any law supervised by ZATCA — not just VAT. This means a VAT refund may be offset against zakat, excise tax, or customs liabilities. ZATCA must notify the taxable person where such an offset is carried out.

The April 2025 amendment also added Article 69(7): ZATCA may examine any tax period for which a refund has been submitted, within one calendar year from the date of submission — a new and specific audit trigger linked directly to refund claims.

Designated Persons: VAT Refunds Without Registration

Article 70 governs VAT refunds for categories of persons who do not carry on an economic activity subject to VAT but incur VAT on purchases in Saudi Arabia. The April 2025 amendments significantly expanded and restated this article.

The categories eligible under the Minister of Finance’s designation authority now expressly include: foreign governments and international organisations, diplomatic and consular bodies and missions, licensed real estate developers (for qualifying residential development activity), and other categories as determined by ZATCA’s Board. Each category must meet requirements set by ZATCA’s Board to qualify for the refund mechanism.

Key procedural requirements include: submitting a registration application to receive an individual identification number; using that number on all refund applications; and submitting one refund application per quarter or per calendar year — not more. Applications must be submitted within six months of the end of the relevant year. ZATCA has 30 business days to pay from the date of approval notification.

The Most Consequential Compliance Risks

Missing the 20-day correction deadline on understatements. Once a business discovers it has underdeclared output tax or overclaimed input tax by more than SAR 15,000, the 20-day clock starts immediately. Missing it converts a correction obligation into an assessment risk.
Filing outstanding returns before submitting a refund claim. ZATCA will reject a refund request where any returns are outstanding. A business planning to claim a large refund must first ensure its return filing position is complete.
Not accounting for ZATCA’s expanded offset power. Post-2025, ZATCA can offset a VAT refund against zakat, excise, or customs liabilities. A business expecting a cash refund should check whether it has any cross-tax liabilities outstanding before submitting the claim.
Triggering the refund-linked audit window. Submitting a refund claim now activates a one-year audit window for the period under claim. Businesses should ensure their records for refund periods are complete and audit-ready before filing the claim.
Assuming the 5-year window always applies. For any period involving intentional structuring to avoid VAT, or for periods where registration was avoided, the 20-year assessment window applies. This is not a theoretical risk — it is a live exposure for any business that operated outside the VAT system.

Key Takeaways

VAT returns are due by the last day of the month following the end of each tax period. Payment is due on the same date.
Businesses with annual taxable supplies above SAR 40 million must file monthly. All others default to quarterly but may elect monthly.
Understatements must be corrected within 20 days of discovery — unless the net difference is below SAR 15,000, in which case it may be folded into the next return.
Overstatements may be corrected in any subsequent return, subject to the five-year limitation.
ZATCA’s standard assessment window is five years. It extends to twenty years for intentional breach or registration failure.
The April 2025 amendments added a new provision allowing ZATCA to conduct post-limitation-period examinations with taxpayer consent (Article 64(10)).
ZATCA’s refund offset power now extends across all taxes it supervises — VAT refunds can be applied against zakat, excise, and customs liabilities.
Submitting a refund claim triggers a one-year audit window for the refund period under Article 69(7). Records must be audit-ready before filing.

May 26, 2026

Record-Keeping Obligations: What ZATCA Requires You to Retain

ZATCA’s audit powers are only as useful as the records the auditor can access. The record-keeping rules under Saudi VAT do not simply require businesses to “keep their invoices.” They specify what must be kept, in what language, in what format, for how long, and where. A business with excellent VAT compliance on paper but inadequate record-keeping infrastructure will not survive an audit cleanly.

The Legal Framework: Articles 66 and GCC Agreement Article 59

Article 66 of the VAT Implementing Regulations is the primary record-keeping provision. It sets out retention periods, language requirements, storage location rules, and conditions for electronic storage. The GCC VAT Agreement (Article 59) establishes the minimum framework at treaty level, with the Kingdom implementing more detailed requirements through Article 66.

The GCC Agreement’s baseline position: tax invoices, books, records, and accounting documents must be retained for a minimum of five years from the end of the year to which they relate. For records pertaining to real estate, the GCC Agreement extends this to fifteen years. Saudi Arabia’s own implementing rules go further in certain respects — establishing a six-year retention period for most records and specific rules for capital assets.

Retention Periods

Record Type	Minimum Retention Period	Starting From
Tax invoices, books, records, and accounting documents (general)	6 years	End of the tax period to which they relate
Records relating to capital assets (moveable)	Adjustment period (6 years) + 5 years	Date of acquisition of the capital asset
Records relating to capital assets (immoveable / real estate)	Adjustment period (10 years) + 5 years	Date of acquisition of the capital asset
Records pertaining to real estate (GCC Agreement minimum)	15 years	End of the year to which they relate

⚠ Capital Asset Records Must Be Kept Longer Than Most Businesses Realise

A moveable capital asset (machinery, vehicles, IT equipment) has a six-year VAT adjustment period. Records must be kept for that period plus five additional years — totalling up to eleven years from acquisition. For immoveable assets (buildings, permanent structures), the adjustment period is ten years, meaning records may need to be retained for up to fifteen years. Businesses that purge records on a rolling six-year basis are likely destroying capital asset documentation prematurely.

What Must Be Retained

Article 66 covers “invoices, books, records and accounting documents.” In practice, this encompasses:

All tax invoices issued — both outbound (supplier copies) and inbound (customer copies received)
All credit and debit notes — including the original invoice referenced by each note
All simplified tax invoices — both issued and received where relevant
VAT returns and workings — the filed returns for each tax period and the underlying calculations
Input tax schedules — the supporting detail behind input VAT deduction claims
Proportional deduction calculations — where the business makes both taxable and exempt supplies
Currency conversion calculations — the SAMA daily rates used and the VAT calculations for all foreign-currency transactions
Import documentation — customs declarations and supporting documents for imported goods
Capital asset records — purchase invoices, asset registers, and adjustment calculations for the full applicable adjustment period plus five years
Contracts and agreements — underlying commercial contracts that establish the nature, value, and VAT treatment of supplies
Self-billing agreements — written agreements with suppliers under any self-billing arrangements
E-invoices in structured format — where the business is subject to e-invoicing regulations, electronic invoices must be retained in their original structured format

Language and Location Requirements

Language: Arabic

Article 66(2) requires that records be kept in Arabic, and that all tax invoices be issued in Arabic (with other languages permitted as translations alongside). For electronic systems, Article 66(3)(b) specifies that data should be entered in Arabic to the extent practicable.

Businesses that maintain their accounting systems primarily in English — common for multinationals using global ERP templates — must ensure that the underlying invoice data (supplier name, description of supply, etc.) satisfies the Arabic requirement. A system that stores records exclusively in English is technically non-compliant, though the practical consequence depends on the ability to produce Arabic-language outputs on demand.

Location: Must Be Accessible in the Kingdom

Article 66(3) requires that invoices, records, and documents be kept in the Kingdom — either physically or electronically. Electronic storage is explicitly permitted, subject to conditions, but the data must be accessible through a terminal point or access point in Saudi Arabia. Cloud-hosted records stored on servers in foreign jurisdictions satisfy this requirement only if they can be accessed and produced from within the Kingdom upon ZATCA’s request.

Multinational Record-Keeping Risk

A Saudi subsidiary of a multinational group that stores its VAT records exclusively on a European or US-based group server — accessible only through a group IT portal — may satisfy the technical accessibility test (access point in KSA) but risks challenges if ZATCA requests records and the group IT system imposes access restrictions or delays. Local backup retention of Saudi VAT records, accessible without group IT dependency, is the safer approach.

Electronic Storage: The Specific Conditions

Article 66(3) sets out the conditions that must be met when records are stored electronically. These are not optional guidelines — they are legal requirements:

Invoices, documents, and records must be accessible and producible from the computer system used upon ZATCA’s request
Data must be entered in Arabic to the extent practicable, and the electronic records must be identical copies of the original documents
Original documents corroborating accounting entries must be maintained and produced upon ZATCA’s request
Final accounts and balance sheets may be generated directly from the computer system
The business must document its data entry procedures and accounting system for reference
Adequate security measures and controls must be in place to prevent tampering with electronic records
ZATCA may conduct a review of the systems and programs used to prepare records electronically
Persons subject to the e-invoicing regulations must retain electronic invoices in the structured format prescribed by those regulations — not simply as printed PDFs

⚠ Printing E-Invoices to PDF Does Not Satisfy Retention Obligations

A structured XML e-invoice and a PDF printout of that invoice contain fundamentally different data. The PDF shows what is readable by a human. The XML contains machine-readable structured data that ZATCA’s system can validate and process. Article 66(3)(h) requires retention of electronic invoices in the form prescribed by the e-invoicing regulations — which means the structured XML, not a PDF copy. Businesses that print and delete e-invoices are failing to meet this obligation.

ZATCA’s Right of Access

Article 64(6) of the Implementing Regulations governs the examination process. ZATCA auditors may:

Conduct examinations at the business’s premises on 20 days’ notice — or without notice where ZATCA has grounds to suspect a violation or non-cooperation
Request physical copies or electronic files of records during the examination
Temporarily seize documents if there is reason to believe they may be hidden, damaged, or tampered with
Conduct searches and collect evidence where a violation is suspected

Article 66(4)(a) permits a resident taxable person to appoint a third party in the Kingdom to manage their record-keeping obligations — without releasing the taxable person from responsibility. Article 66(4)(b) requires a non-resident taxable person without a tax representative to appoint a Kingdom-based third party specifically for this purpose.

The limitation period for ZATCA assessments is generally five years from the end of the calendar year in which the tax period falls (Article 64(3)). Where ZATCA has evidence of intentional breach or where a person failed to register, the assessment window extends to twenty years. Records must therefore be retained to cover whichever assessment window applies to the business’s risk profile.

◆ Key Takeaways

The general VAT record-keeping period under Article 66 is six years from the end of the tax period — not five. The GCC Agreement minimum is five years; Saudi Arabia’s implementation is stricter.
Capital asset records must be kept for the adjustment period (6 years for moveable, 10 years for immoveable) plus an additional 5 years — potentially up to 15 years from acquisition for real estate.
Records must be kept in Arabic and must be accessible in the Kingdom — physically or electronically via a terminal or access point within Saudi Arabia.
Electronic storage is permitted but subject to specific conditions: records must be accessible on demand, in Arabic to the extent practicable, with original corroborating documents retained and tamper-prevention controls in place.
E-invoices must be retained in structured format as prescribed by the e-invoicing regulations — printing to PDF and deleting the structured original is not a compliant retention method.
ZATCA auditors can visit on 20 days’ notice or without notice in cases of suspected violation. Records must be immediately producible from whatever system the business uses.
The standard ZATCA assessment window is five years. Where fraud or registration failure is involved, it extends to twenty years. Record retention must be calibrated to the applicable window, not the general default.

This article reflects the Saudi VAT Implementing Regulations and the April 2025 bylaw amendments. It is for informational purposes only and does not constitute legal or tax advice. Readers should confirm the current position with ZATCA guidance or a qualified Saudi VAT advisor. dariba.co is an independent platform with no consulting relationships.

May 26, 2026

Currency Conversion: The SAMA Daily Rate Rule

Saudi Arabia conducts enormous volumes of international trade and services procurement in currencies other than SAR. Every one of those foreign-currency transactions that carries a Saudi VAT obligation requires a conversion to Riyals — and the law is specific about which rate to use, on which date. Using the wrong rate, even by a small margin, produces incorrect VAT declarations across every affected transaction. At scale, the cumulative impact is material.

The Rule: Article 61

Article 61 of the VAT Implementing Regulations is the governing provision:

The Legal Requirement

Where any relevant amount to which the Regulations apply is expressed in a currency other than Saudi Riyal, the amount must be converted to SAR using the daily rate prescribed by the Saudi Central Bank (SAMA) on the date that the relevant tax becomes due in accordance with the Agreement and the Law.

Three elements are critical:

The rate source: Saudi Arabian Monetary Authority (SAMA) — not any commercial bank rate, internal treasury rate, or interbank market rate
The rate type: The daily rate — not a monthly average, not a month-end rate, not a year-to-date average, and not a budget or forecast rate
The date: The date the tax becomes due — which is the date of supply, determined under the supply rules in the Agreement and Law, not the date of payment

The GCC VAT Agreement (Article 56(2)) also establishes this principle at treaty level: tax invoices can be issued in any currency, but the value of the tax must be written in the currency of the Member State where the place of supply is located, based on the official exchange rate in force in that state on the tax due date.

Which Date: The Tax Due Date Is Not the Payment Date

The single most common source of currency conversion errors in Saudi VAT compliance is using the payment date rather than the tax due date (date of supply) as the conversion reference point. These are often different — sometimes by days, sometimes by months.

Rate Reference Point	Compliant?	Why
SAMA daily rate on date of supply (tax due date)	Correct	Article 61 requires this specifically
SAMA daily rate on date of payment	Incorrect	Payment date ≠ tax due date in most cases
SAMA daily rate on date of invoice receipt	Incorrect	Invoice receipt date ≠ tax due date
Month-end SAMA rate	Incorrect	Not the rate on the tax due date
Average monthly SAMA rate	Incorrect	Not the rate on the tax due date
Commercial bank published rate	Incorrect	Article 61 requires the SAMA rate specifically
Internal treasury / budget rate	Incorrect	Not a SAMA rate and not a daily rate on the supply date

Example: Why the Date Matters

A Saudi company receives consulting services from a UK firm. The services are completed on 15 March (tax due date). The UK firm issues its invoice on 31 March. Payment is made on 20 April.

The SAMA daily rate on 15 March must be used for the VAT calculation — not the 31 March rate, not the 20 April rate. If the GBP/SAR rate moved between 15 March and 20 April, using the payment date rate produces a wrong VAT figure. For large-value transactions, the difference can be significant.

Currency on the Tax Invoice

Article 53(5)(j) of the Implementing Regulations requires that the VAT amount payable be shown on the tax invoice in SAR. This applies regardless of the currency of the underlying transaction. A USD invoice, a EUR invoice, or a GBP invoice must each carry a SAR-equivalent VAT figure — calculated at the SAMA daily rate on the tax due date.

The transaction amount itself may be stated in any currency. The VAT on that transaction must be converted and shown in Riyals. An invoice that states the VAT as “USD 1,500 (equivalent SAR 5,625)” satisfies the requirement. An invoice that shows only “USD 1,500 VAT” does not.

⚠ Non-Resident Supplier Invoices Are Frequently Wrong on This Point

Foreign suppliers billing Saudi customers in USD, EUR, or GBP routinely issue invoices that either: (a) show no Saudi VAT at all (relying on the reverse charge), or (b) show VAT in the foreign currency only, without a SAR equivalent. In the latter case, the Saudi customer receiving the invoice and attempting to self-assess via the reverse charge must calculate the SAR figure themselves using the SAMA rate on the supply date — and document that calculation for the audit file. The foreign invoice itself cannot be used as-is.

Where to Find the SAMA Daily Rate

SAMA publishes official daily exchange rates on its website. Rates are published for all major currencies against the SAR. The rate relevant for VAT purposes is the SAMA daily rate published for the date on which the tax becomes due.

For internal compliance purposes, the rate retrieval and storage process must be:

Date-specific: The rate is pulled for the exact date of supply — not a nearby date, not a default date
Documented: The rate used and the date from which it was sourced must be retained alongside the VAT calculation for each transaction
Consistent: The same source (SAMA) must be used for all transactions — not SAMA for some and commercial bank rates for others
Systematic: For high-volume transactions, the rate retrieval should be automated through an API or systematic daily pull — not performed manually and inconsistently

During a ZATCA audit, the auditor will ask the business to produce evidence of the exchange rate used for each foreign-currency VAT calculation. If the business cannot demonstrate that the SAMA daily rate on the correct date was used, the calculation is challenged and the correct VAT is reassessed.

ERP Configuration Risk

Most enterprise accounting systems have currency conversion functionality built in — but it is typically configured for financial reporting purposes, not for VAT compliance. Common misconfigurations include:

Default to payment date rate. Many ERPs apply the exchange rate on the date a payment is posted, not the date of supply. For VAT purposes, this is systematically wrong.
Monthly average rate tables. Some financial systems load monthly average rates for the entire month. These are used for P&L translation purposes and have no role in VAT calculations.
Single rate per currency period. Systems that carry one rate per month for each currency cannot produce the day-specific SAMA rate required.
Bank feed rates. Rates pulled from bank transaction data reflect the bank’s own FX spread, not the SAMA official rate.

Businesses with significant foreign-currency transaction volumes should specifically configure their VAT calculation workflow to use SAMA daily rates on supply dates — separately from their financial reporting FX configuration. Where this is not possible within the system, a manual override or documented supplementary calculation process must be in place.

◆ Key Takeaways

Article 61 requires foreign-currency amounts to be converted to SAR using the SAMA daily rate on the date the tax becomes due — which is the date of supply, not the payment date.
No other rate is permitted: not commercial bank rates, not monthly averages, not month-end rates, not budget rates, and not internal treasury rates.
The VAT amount on every tax invoice must be expressed in SAR, even where the transaction is denominated in a foreign currency.
Foreign supplier invoices showing VAT in foreign currency only are non-compliant. The Saudi customer receiving such an invoice must calculate and document the SAR equivalent using the SAMA rate on the supply date.
The SAMA rate used, the date it was sourced, and the calculation workings must be retained alongside each affected invoice as part of the VAT audit trail.
Most ERP systems are configured for financial reporting FX purposes, not VAT compliance. The VAT conversion workflow must be specifically configured to use SAMA daily rates on supply dates — and tested to confirm it is working correctly.
Systematic FX rate errors across a large volume of foreign-currency transactions compound quickly. A regular reconciliation of FX rates used in VAT calculations against SAMA published rates is a prudent control.

May 26, 2026

VAT on Continuous Supplies and How to Determine the Tax Date

Continuous supplies — ongoing contracts, retainers, leases, subscriptions, utilities — do not have a single obvious supply event. The goods or services flow without interruption. Determining when VAT becomes due on each part of that flow is one of the more technically demanding areas of Saudi VAT compliance, and one that directly affects which tax return period captures the output tax and which period allows the corresponding input tax deduction.

What Is a Continuous Supply

A continuous supply is one where goods or services are provided on an ongoing basis rather than as a single discrete event. The supply does not have a single completion date — it flows from commencement through the term of the arrangement. Common examples in Saudi business include:

Commercial property leases and licence agreements
Retainer-based professional services (legal, accounting, consulting)
Maintenance and facilities management contracts
Software licences and SaaS subscriptions
Utilities — electricity, water, telecommunications
Security services, cleaning contracts, and outsourced services
Long-term construction contracts with periodic milestone or progress billing

Because continuous supplies do not resolve into a single tax point, Article 20 of the Implementing Regulations provides a specific set of rules for determining when each successive supply event occurs and when the tax becomes due.

The Three Rules for Continuous Supplies

Rule 1 — Periodic Invoicing Under Contract (Article 20(1))

When This Rule Applies

Where services are supplied on a continuous basis and the contract or agreement states that consideration is payable periodically — resulting in invoices being issued on a continuous basis — the date of supply is the earliest of:

• The due date of each periodic payment

• The date payment is actually made

• The date an invoice is issued

All of the above are subject to one overriding condition: this must occur at least once in any twelve consecutive months.

Practical Example — Monthly Retainer

A legal firm has a monthly retainer with a corporate client. The contract states that fees are due on the 1st of each month. The firm issues invoices on the 1st. The date of supply for each month’s retainer fee is the 1st — when payment falls due and when the invoice is issued simultaneously. VAT is due in the return period covering that date.

Rule 2 — Other Continuous Supplies Without Periodic Terms (Article 20(2))

When This Rule Applies

For all other continuous supply cases — where the contract does not specify periodic payment terms or regular invoicing — each billing or payment event is treated as a separate supply. The tax becomes due on the earlier of the date an invoice is issued or the date payment is received, to the extent of the amount invoiced or paid.

Practical Example — Ad Hoc Progress Billing

A construction contractor issues progress invoices on a project when completion milestones are reached, but the contract does not specify fixed payment dates. Each invoice represents a separate supply event. The tax is due on the date of each invoice — or the date payment is received if earlier.

Rule 3 — The Twelve-Month Backstop (Article 20(3))

When This Rule Applies — and Why It Matters

Where a continuous supply is ongoing but no invoice has been issued and no payment has been received, the supply is deemed to occur — and tax is due — on the date falling twelve months after the later of:

• The date the supply commenced, and

• The date of the previous deemed supply event (i.e., the last invoice or payment)

This is the backstop rule: it prevents VAT from being indefinitely deferred on an ongoing supply simply by not invoicing or not receiving payment. Even without any billing activity, the supply crystallises and tax becomes due after twelve months.

⚠ The Twelve-Month Rule Catches Many Businesses

Long-term contracts where invoicing is irregular — particularly intercompany arrangements, management fee structures, and intragroup service agreements — frequently trigger the twelve-month backstop without the supplier or the customer noticing. If no invoice and no payment has occurred in the past twelve months for an active ongoing supply, a tax point has already passed. ZATCA auditors look specifically for these situations because they reliably produce undeclared output tax.

Special Rules: Utilities and Government Contracts

Utilities: Oil, Gas, Water, and Electricity (Article 20(4))

The supply of oil, gas, water, or electricity through a distribution network — where the supply is not made on a continuous basis — is deemed to occur on the earlier of:

The date an invoice is issued by the supplier
The date payment is received by the supplier

This covers metered utility billing cycles, where the supply is episodic (meter readings taken at intervals) rather than genuinely continuous.

Government Body Contracts (Article 20(5))

Where goods or services are supplied to a government body under a contract executed in accordance with the Government Tenders and Procurement Law, the date of supply and the tax due date is the earlier of:

The date a payment order in respect of the supply is issued to the customer
The date consideration — or part thereof — is received

This recognises the government procurement cycle and the role of the payment order as a formal billing trigger in public sector contracting.

Invoicing Implications for Continuous Supply Contracts

The date of supply rules for continuous supplies have direct consequences for invoicing discipline. Where a contract specifies periodic payment dates, the supplier should issue invoices at or around those dates — because the tax point is set by the due date, invoice date, or payment date, whichever is earliest. Delayed invoicing that occurs after the due date produces a retrospective tax point in the past, meaning the output tax should already have been declared.

Contract Type	Tax Point Rule	Invoicing Discipline Required
Fixed periodic payment terms (e.g., monthly retainer)	Earlier of due date, payment, or invoice — at least every 12 months	Issue invoices on or before each due date
No fixed payment terms, milestone billing	Earlier of invoice date or payment receipt	Issue invoices promptly on each billing event
No billing, no payment for 12 months	Twelve-month backstop — supply deemed to occur automatically	Must invoice; failure to do so does not defer the tax point
Government contract	Earlier of payment order or receipt of consideration	Track payment order issuance as the trigger event

◆ Key Takeaways

Continuous supplies — leases, retainers, maintenance contracts, subscriptions — follow specific tax point rules under Article 20, distinct from single-event supplies.
Where the contract specifies periodic payment terms, the tax point is the earliest of: the due date, actual payment, or invoice date — and must occur at least once per twelve months.
Where no periodic terms exist, each invoice or payment event is a separate supply, with tax due on the earlier of invoice date or payment receipt.
The twelve-month backstop rule in Article 20(3) deems a supply to have occurred if no invoice or payment has been made in twelve months — even if no billing has taken place. Tax is due at that point regardless.
Utility supplies (metered billing) and government body contracts follow their own specific tax point rules.
Intragroup management fee arrangements, intercompany service agreements, and ad hoc continuous supply contracts are the highest-risk categories for twelve-month backstop failures on ZATCA audit.
Invoicing must track contract payment terms precisely. Delayed invoicing after a contractual due date does not defer the tax point — it retrospectively places the supply in an earlier VAT return period.

May 26, 2026

Self-Billing Arrangements: When Buyers Issue Invoices
In most transactions, the supplier issues the invoice. Self-billing reverses that arrangement — the customer issues a tax invoice on the supplier’s behalf. It is a commercially practical arrangement in sectors where the buyer has more accurate information about transaction values than the seller. But it comes with precise conditions, and getting them wrong means neither document — the self-billed invoice nor any supplier-issued invoice — is compliant.
01
The Legal Basis

GCC VAT Agreement Article 58(1) establishes the self-billing framework:

Article 58(1) — GCC VAT Agreement

A taxable customer who receives goods or services supplied to them by a taxable supplier may issue tax invoices, provided that the supplier consents and the tax invoice is marked as a self-issued invoice with the approval of the competent tax administration. A self-issued invoice is then treated as an invoice issued by the supplier.

Article 53(2) of the Implementing Regulations implements this at the Kingdom level. A customer may issue a tax invoice on behalf of the supplier where:

Both parties agree in writing that the customer will issue the invoice for the supply

The supplier provides written confirmation that it will not separately issue invoices for those supplies for which the customer has issued tax invoices

The written agreement between the parties is not a formality — it is the legal foundation of the arrangement. Without it, the customer has no authority to issue a VAT-compliant document on the supplier’s behalf, and the document the customer issues carries no legal weight as a tax invoice.
02
Why Self-Billing Exists: Commercial Context

Self-billing arrangements make commercial sense in a specific set of circumstances: where the buyer — not the seller — is better placed to determine the value of the supply at the point of invoicing.

Media Buying

An advertising agency buys airtime or digital placements from media owners on behalf of clients. The agency knows the final confirmed pricing across dozens of placements before the media owner’s billing cycle generates invoices. Self-billing allows the agency to consolidate and document at the point of booking confirmation rather than waiting for multiple media owner invoices.

Agricultural and Commodity Procurement

A food processor purchasing agricultural produce from dozens of small farmers operates self-billing because the farmers — who lack accounting infrastructure — cannot reliably issue compliant VAT invoices. The processor, who weighs, grades, and prices the produce at intake, is the party with the information needed to create the invoice.

Royalty and Revenue-Share Arrangements

A publisher paying royalties, a platform paying revenue shares to content creators, or a company paying commissions calculated on actual performance data — all of these are situations where the payer has the data to determine the payment amount before the payee does.
03
Compliance Requirements

A self-billed tax invoice must meet all the mandatory content requirements of a regular full tax invoice under Article 53(5). Being issued by the customer rather than the supplier does not exempt it from any of the twelve mandatory fields. In addition:

The document must be clearly marked as a self-billed invoice — typically with wording such as “Self-Billed Tax Invoice” or “Invoice Issued by Customer on Behalf of Supplier”

The TIN shown must be the supplier’s TIN (since the document represents the supplier’s supply), not the customer’s

The sequential numbering used must be clearly distinguishable from the customer’s own outbound invoice series to avoid confusion between the two directions of invoicing

Both the supplier and customer must retain a copy of every self-billed invoice issued under the arrangement

⚠ The Supplier Cannot Issue Separately

The defining condition of a valid self-billing arrangement is that the supplier must not independently issue invoices for the same supplies. If the supplier issues their own invoice for a supply already covered by a customer-issued self-billed invoice, two tax invoices exist for the same supply — and the output tax on that supply risks being doubled, with neither party certain which document controls. The written agreement must include the supplier’s commitment not to duplicate invoicing.
04
Third-Party Invoicing: A Related Arrangement

Article 53(3) covers a related but distinct arrangement: where the supplier itself arranges for a third party to issue tax invoices on its behalf. This is permitted subject to ZATCA’s approval and requires that all the legal requirements of Article 53 are satisfied. The supplier remains responsible for the accuracy of the information on the invoice and for reporting output tax on the supply — the third party is acting as the supplier’s agent, not independently.

GCC VAT Agreement Article 58(2) confirms this principle: a taxable person may engage others to issue tax invoices on its behalf, subject to tax administration approval and provided all obligations are met.

This arrangement is common in outsourced billing operations, shared service centre structures, and ERP systems where invoicing is centralised across an enterprise group. It is distinct from self-billing because the direction of the supply relationship is unchanged — the supplier still supplies, and the invoice still represents the supplier’s output. Only the document generation is outsourced.
05
Risks and Practical Controls

No written agreement in place. Self-billing without a documented written agreement between supplier and customer is legally invalid. ZATCA will not recognise customer-issued documents as tax invoices in the absence of the foundational agreement.

Supplier also issues invoices. Duplicate invoicing creates double output tax exposure and makes the audit trail impossible to reconcile. The agreement must include an express prohibition on the supplier issuing separate invoices for covered supplies.

Wrong TIN shown. The supplier’s TIN must appear on the self-billed invoice — not the customer’s. A self-billed invoice with the customer’s TIN as the primary identifier does not correctly represent the supply.

Sequential numbering series confusion. If the customer uses the same invoice number series for both outbound customer invoices and self-billed supplier invoices, the audit trail becomes unworkable. Dedicated series for self-billed documents are essential.

Missing copy retention. Both parties must retain copies. The supplier’s obligation to report output tax on the supply is not extinguished because the customer issued the document — and the supplier must be able to evidence the supply on audit.
◆ Key Takeaways

Self-billing allows the customer to issue a tax invoice on behalf of the supplier, provided both parties agree in writing and the supplier commits not to issue separate invoices for those supplies.

The arrangement is established in GCC VAT Agreement Article 58(1) and implemented in Article 53(2) of the Implementing Regulations.

A self-billed invoice must meet all twelve mandatory field requirements of a full tax invoice — it is not exempt from any content requirement by virtue of being customer-issued.

The document must be clearly marked as self-billed, must show the supplier’s TIN, and must use a dedicated sequential numbering series that does not merge with the customer’s outbound invoice series.

If the supplier independently issues invoices for the same supplies, a dual-invoicing problem arises — both documents purport to evidence the same output tax obligation. The written agreement must prevent this.

Third-party invoicing — where the supplier outsources document generation to a billing agent — is a separate, related arrangement governed by Article 53(3). The supplier remains responsible for the accuracy of the information and for declaring the output tax.
This article reflects the Saudi VAT Implementing Regulations and the April 2025 bylaw amendments. It is for informational purposes only and does not constitute legal or tax advice. Readers should confirm the current position with ZATCA guidance or a qualified Saudi VAT advisor. dariba.co is an independent platform with no consulting relationships.
May 26, 2026

Blog

The New Provision: Article 64(10)

Why This Provision Was Introduced

The Consent Decision: When to Agree and When Not To

Considerations That Support Giving Consent

Considerations That Counsel Against Giving Consent

Interaction With the New Refund-Linked Audit Window

The Legal Basis for Examinations

The Notice Requirement — and When It Doesn’t Apply

During the Examination: Rights and Obligations

Document Return After Examination

What Triggers a ZATCA Audit

How to Prepare — Before the Notice Arrives

The Three Correction Routes

Route 1: Understated Tax Above SAR 15,000 — The 20-Day Obligation

What Constitutes an Understatement

Route 3: The SAR 15,000 Threshold — And How 2025 Changed It

Route 2: Overstated Tax — Correct in Any Subsequent Return

What a Correction Submission Must Contain

The Two Tax Periods and the Threshold

Electing Monthly When Below the Threshold

Why Would a Business Elect Monthly?

Reverting From Monthly to Quarterly

Practical Implications of Period Choice

The Filing Deadline

What the Return Must Include

Self-Assessment: What the Filed Return Means Legally

Cash Accounting: The Optional Alternative

The Five Most Costly Return Errors

Filing Mechanics: What, When, and How

Tax Periods: Monthly vs. Quarterly

Correcting Errors: The Three-Route Framework

ZATCA’s Assessment Powers

How ZATCA Audits Work

Refunds: The Standard Mechanics

Designated Persons: VAT Refunds Without Registration

The Most Consequential Compliance Risks

The Legal Framework: Articles 66 and GCC Agreement Article 59

Retention Periods

What Must Be Retained

Language and Location Requirements

Language: Arabic

Location: Must Be Accessible in the Kingdom

Electronic Storage: The Specific Conditions

ZATCA’s Right of Access

The Rule: Article 61

Which Date: The Tax Due Date Is Not the Payment Date

Currency on the Tax Invoice

Where to Find the SAMA Daily Rate

ERP Configuration Risk

What Is a Continuous Supply

The Three Rules for Continuous Supplies

Rule 1 — Periodic Invoicing Under Contract (Article 20(1))

Rule 2 — Other Continuous Supplies Without Periodic Terms (Article 20(2))

Rule 3 — The Twelve-Month Backstop (Article 20(3))

Special Rules: Utilities and Government Contracts

Utilities: Oil, Gas, Water, and Electricity (Article 20(4))

Government Body Contracts (Article 20(5))

Invoicing Implications for Continuous Supply Contracts

The Legal Basis

Why Self-Billing Exists: Commercial Context

Compliance Requirements

Third-Party Invoicing: A Related Arrangement

Risks and Practical Controls