Designated Persons Eligible for VAT Refunds

A designated person, for Article 70 purposes, is a person or entity that incurs VAT on purchases of taxable goods or services in Saudi Arabia but does not carry on an economic activity that would make them a taxable person eligible for standard input tax recovery through the VAT return mechanism.

The April 2025 amendment to Article 70 comprehensively restated and expanded the designated person categories. The Minister of Finance may designate categories of persons as eligible for the refund mechanism. The categories that may be designated include:

• Foreign governments, international organisations, diplomatic and consular bodies and missions, and heads and members of diplomatic and consular corps accredited to the Kingdom — provided that reciprocity applies or in application of concluded international agreements
• Licensed real estate developers — in relation to VAT incurred on goods and services received in the Kingdom in connection with qualifying residential development activity
• Other categories as may be determined by ZATCA’s Board of Directors or its authorised representative, setting out the specific requirements each category must meet

Designation is not automatic. Each category must meet requirements issued by ZATCA’s Board, and individual persons within a designated category must apply for and receive an individual identification number before submitting refund applications.

Article 70(3) describes the registration and identification mechanism. An eligible person within a designated category must first submit an application to ZATCA for approval to participate in the refund scheme. Upon acceptance, ZATCA issues an individual identification number (distinct from the TIN used by registered taxable persons). This number must be quoted on all refund applications and in all correspondence with ZATCA related to the refund.

Refund Period Options

Article 70(4) gives designated persons a choice of refund period: either a quarterly period or a calendar year. Only one refund application may be submitted for each period. This differs from the standard taxable person refund mechanism, which operates through the return filing cycle.

The April 2025 amendments added detail on period flexibility: ZATCA may specify the refund period in the notice approving the person’s registration, and may change the refund period (once per twelve calendar months) either on the person’s request or at ZATCA’s discretion. Any change takes effect from the date specified in the notice.

Submission Deadline

Under the amended Article 70, refund applications must be submitted within six months from the end of the relevant refund period. Applications submitted outside this window are time-barred.

The refund application under Article 70 may only include VAT paid on goods and services for which a compliant tax invoice dated within the indicated refund period is held at the time of application. This is a strict documentary requirement — VAT without a matching invoice, or VAT where the invoice is dated outside the refund period, cannot be claimed.

Article 70(7) contains an important limitation for government bodies that qualify as designated persons: a government body or entity can only apply for a refund to the extent it is not acting in a commercial capacity. Where a government entity conducts both governmental and commercial functions, only the non-commercial VAT costs are eligible for the designated person refund.

Payment Timeline

The April 2025 amendment added Article 70(16): upon notification of approval (in whole or in part), ZATCA must pay the approved amount to the bank account specified by the eligible person within thirty (30) business days from the date of approval notification. ZATCA may offset the approved amount against any tax, fine, or other amounts due — consistent with the expanded offset power in Article 69(5).

Documentation Requests

The April 2025 amendment also added Article 70(15): ZATCA may request copies of tax invoices or additional documents in paper or electronic form during its review. The eligible person must submit those documents within twenty (20) working days of ZATCA’s request. Failure to provide the required documents within the period may result in rejection of the refund request.

Obligation to Self-Report Errors

The new Article 70(17) introduces a self-reporting obligation: if any person eligible for a refund incorrectly or without right recovers a tax amount, they must notify ZATCA immediately upon becoming aware of the error and pay the incorrectly recovered amount back to ZATCA. This is an automatic obligation — it does not require a ZATCA assessment before the repayment obligation arises.

Record-Keeping

As amended, the records and documents related to a refund claim must be retained for at least six years from the end of the relevant refund period. Foreign governments, international organisations, and diplomatic bodies are exempt from this retention obligation (provided reciprocity applies), but all other designated persons must comply.

Article 70(14) — which the April 2025 amendments preserved unchanged — provides a specific designated person route for licensed real estate developers. A person carrying out an economic activity as a licensed real estate developer may apply to register as a designated person eligible for a refund of VAT incurred on goods and services received in the Kingdom related to that activity.

This is particularly relevant for developers of residential real estate — where the output supply (residential lease or sale) may be VAT-exempt, blocking standard input tax recovery through the VAT return. The designated person mechanism offers a pathway to recover input VAT on qualifying development costs that would otherwise be permanently irrecoverable.

ZATCA may establish additional rules and procedures for real estate developer refunds beyond the general Article 70 framework. Developers pursuing this route should verify current ZATCA guidance on the specific requirements and conditions applicable to their category.