GTL Summary:

Document Type: IR - Implementing Regulations
Law: Value Added Tax Law
Decision Number: 3839-article-40
Year: 2016
Country: 🇸🇦 KSA
Official Name: Article 40 - Adjustment to Value of a Supply
Last updated at: 2025-11-27 14:38:44 UTC

Chapter 7 - Value of Taxable Supplies

Article 40 - Adjustment to Value of a Supply

  1. The value of a Supply is adjusted in the following cases where in relation to a Taxable Supply by a Taxable Person:

    1. the Supply is cancelled or terminated after the Supply has taken place or been treated as taking place, in whole or in part,

    2. here is a material change or alteration to the nature of the Supply resulting in a change in the Tax charged,

    3. the previously agreed Consideration for the Supply is altered for any reason, including due to an offer of an additional discount after the sale was made,

    4. the Goods or services or part thereof are returned to the Supplier and the Supplier accepts such return.

  2. If the value of the supply is amended in accordance with the cases stipulated in paragraph (1) of this Article, the tax previously declared shall be adjusted pursuant to the provisions set forth in paragraph (3) of this Article, where the supplier has any of the following:[60]

    1. issued a Tax Invoice in relation to the supply and the amount shown therein on the basis of which the Tax due has been calculated does not reflect the occurrence of one or more of the cases provided for in the first Paragraph of this Article or the cases provided for in the Agreement.

    2. accounted for an amount of Tax that does not reflect the occurrence of one or more of the cases provided for in the first Paragraph of this Article.

  3. In cases where a subsequent adjustment to the value of goods or services is required, the taxable person acting as a supplier shall make an adjustment to the output tax previously due, to reflect the tax amount calculated upon the change in consideration.[61]

  4. An adjustment that results in an increase to Supplier's Output Tax made in accordance with the third Paragraph of this Article must be made in the Tax Return for the Tax Period in which the event referred to in the first Paragraph of this Article occurred.

  5. An adjustment that results in a decrease in Supplier's Output Tax made in accordance with the third Paragraph of this Article must be made in the Tax Return for the Tax Period in which the event referred to in the first Paragraph of this Article occurred or in the Tax Return for the period during which the Credit Note was issued to the Customer, whichever is later.

  6. In the cases prescribed by the second Paragraph of this Article which require an adjustment to the value of a supply of Goods or services to a Customer who is or was a Taxable Person on the date of the supply, the Customer must correct its Input Tax to reflect the Tax amount calculated on the change in Consideration in the Tax Period in which the Credit Note or Debit Note is issued.

  7. In cases where a Taxable Person does not receive all or part of the Consideration for a Taxable Supply made by him, the Taxable Person may reduce his Output Tax for the Tax amount calculated on the Consideration not paid in the Tax Return in which all of the following conditions are met:

    1. The Taxable Person has previously included Tax calculated on the Taxable Supply as Output Tax on a Tax Return and made payment of the Tax due,

    2. The Consideration is in respect of a Supply of Goods or services made to a Person who is not a Related Person,

    3. A period of at least twelve months has passed from the date of the Taxable Supply,

    4. The taxable person shall provide a certificate issued by a licensed and certified auditor in the Kingdom confirming that the bad debts have been written off from the commercial books. The Authority may accept other supporting documentation if the taxable person is not required to appoint an auditor, in accordance with the applicable regulations.[62]

    5. In cases where the total amounts unpaid by the Customer exceed one hundred thousand (100,000) SAR, formal legal procedures have been taken to collect the debts without success and the Taxable Person can provide evidence of these procedures, such as the issuance of a judicial ruling, evidence of the debtor's bankruptcy or a court order initiating any other formal recovery procedure.

  8. A person using the cash accounting basis described in Article 46 of these Regulations must not make any adjustment for non-payment prescribed in the seventh Paragraph of this Article.

  9. If an adjustment to Output Tax is made in accordance with the seventh Paragraph of this Article and the Taxable Person subsequently receives full or partial payment of the Consideration, Tax calculated on the subsequent Consideration received will become payable and must be accounted for in the Tax Return for the Tax Period in which the payment occurs, and a new Tax invoice must be issued to reflect the additional amount received.

  10. If a taxable person deducts input tax on a supply of goods or services but has not received and fully paid for it within a period of twelve months following the end of the month in which the supply occurred, they must adjust the deductible input tax by the amount of tax calculated on the consideration that remains unpaid as of that date, by including the adjustment amount in the tax return for the tax period ending twelve months after the month in which the supply took place.
    This provision excludes supplies of goods under financing contracts, including financial leasing, murabaha, and lease-to-own arrangements, where the supply is received by a taxable person licensed under the relevant financing regime, and payment is made through periodic installments — provided that the contract or agreement remains in effect and there is no legal dispute regarding its enforceability or execution.
    If the supplier has already accounted for and paid the total amount of output tax due on that supply to the Authority in the tax return for the relevant period, the Authority may accept, as sufficient evidence, a written statement issued by the supplier confirming that the supply was made accordingly.[63]

  11. In cases where input tax is adjusted in accordance with paragraph 10 of this Article, and the taxable person subsequently pays the consideration, the amount of input tax deducted may be increased accordingly to reflect the tax calculated on the consideration that has been paid, by including the adjustment amount in the tax return related to the tax period in which the payment was made or any subsequent tax period.[64]

  12. The adjustments required by this Article are subject to any time limits imposed by the Law or these Regulations.

Footnotes

[60] Paragraph (2) was amended pursuant to the decision of the Board of Directors of the General Authority of Zakat and Income, Resolution No. (1-5-20) dated 14 Safar 1441 AH, corresponding to 1 October 2020 AD. Prior to the amendment, this paragraph read as follows:
'Where the value of the Supply is adjusted because any of the cases described in the first Paragraph of this Article has occurred, an adjustment to the Tax previously reported must be made in accordance with the third Paragraph of this Article if the Supplier has both:'

[61] The paragraph was amended by the Zakat, Tax and Customs Authority Board of Directors' Decision No. (01-06-24) dated 17 Jumada Al-Awwal 1446 AH, corresponding to 19 November 2024 AD. Prior to the amendment, this paragraph read as follows:
'To affect an adjustment to Tax previously reported, the Taxable Person who acts as Supplier must adjust the Output Tax previously reported to reflect the amount of Tax calculated on the change in Consideration.'

[62] Subparagraph (d) was amended pursuant to the decision of the Board of Directors of the Zakat, Tax and Customs Authority No. (1-4-23) dated 26 Dhul-Qa'dah 1444 AH (corresponding to 15 June 2023). Prior to the amendment, this paragraph read as follows:
'the Taxable Person holds a certificate from his certified accountant indicating that the unpaid Consideration has been written off in his books,'

[63] This paragraph was amended pursuant to the decision of the Board of the Zakat, Tax, and Customs Authority by circulation No. (01-06-24), dated 17 Jumada al-Awwal 1446 AH (corresponding to 19 November 2024). Prior to the amendment, this paragraph read as follows:
'Any Taxable Person who has deducted Input Tax in respect of a Supply received by that Person, but has failed to make payment in full after a period of twelve months from the date of Supply, must reduce the Input Tax deduction by the amount of Tax calculated on the Consideration not paid at that date.'

[64] This paragraph was amended pursuant to the decision of the Board of the Zakat, Tax, and Customs Authority by circulation No. (01-06-24), dated 17 Jumada al-Awwal 1446 AH (corresponding to 19 November 2024). Prior to the amendment, this paragraph read as follows:
'In cases where an adjustment to Input Tax is made under the tenth Paragraph of this Article and the Taxable Person subsequently makes payment of the Consideration, the Input Tax deduction may be increased correspondingly to reflect the Tax calculated on the Consideration paid.'

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