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

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.

Article 58 sets out the tax period rules with precision:

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)).

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

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.

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.

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.

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.

• 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.