Cancellation of Fines and Exemption of Financial Penalties
Simplified Guide
1 July 2025
Contents
Types of taxes included in the Initiative
Conditions for Benefiting from the Initiative
The Zakat, Tax and Customs Authority ("ZATCA", "Authority") issued this guide for the purpose of clarifying certain treatments concerning the implementation of the statutory provisions in force as of the Guide's issue date. The content of this Guide shall not be considered an amendment to any of the provisions of the Laws and Regulations applicable in the Kingdom.
Furthermore, the Authority would like to highlight that the clarifications and indicative tax treatments, where applicable, shall be implemented by the Authority in light of the relevant statutory texts. Where any clarification, interpretation or content provided in this Guide is modified - in relation to unchanged statutory text - the updated indicative tax treatment shall then be applicable prospectively concerning transactions made after the publication date of the updated version of the Guide on the Authority's website.
"This Guide aims to elaborate H.E. Minister of Finance's Resolution with regard to extension of
Cancellation of Fines and Exemption of Financial Penalties Initiative
which is part of incentive initiatives taken by Zakat, Tax and Customs Authority (ZATCA) to mitigate the financial implications resulting from COVID-19 that affected the establishments. This is for a period of (6) months, starting from 1 July 2025".
Rectifying the status of your establishment
Exempts you from fines
Take advantage of Exemption of Fines Initiative
During the period 1 July 2025 - 31 December 2025
Highlights of the Resolution
Exemption from unpaid financial fines, including:
Exemption from fine resulting from late registration in all tax laws and regulations.
Exemption of delayed payment fines and overdue tax return submission fines in all tax laws and regulations.
Exemption of VAT return correction penalty
Exemption from fines for violations of VAT field detection and E-invoicing, based on Article 45 of the VAT Law.
Exemption shall be subject to specific conditions, including but not limited to:
Registering in the tax system where registration was required for non registered persons.
Submitting all required tax returns to ZATCA and which have not been previously submitted /or correctly declare all undeclared taxes, and paying the full tax debt principal resulting from the submitted/corrected return, alternatively, apply for installment, and follow the approved installment plan, until the end of this initiative on 31 December 2025.
Exemption from late payment fines in the installment plan approved by ZATCA on dues that are due to be paid after the end of the period of this initiative.
The Resolution shall remain effective for (6) months.
Types of Taxes Included in the Initiative
Value Added Tax (VAT)
Withholding Tax
Excise Tax
Income Tax
Real Estate Transaction Tax (RETT)
Initiative Exclusions
Fines paid before the effective date of this Initiative.
Penalties resulting from tax returns that must be submitted to ZATCA after 30 June 2025.
Fines resulting from Tax Evasion violations, including
Late registration.
Delay in payment and return submission.
Return amendment.
Field detection.
Conditions for Benefiting from the Initiative
The taxpayer shall be exempted from:
conditions shall be met: Late registration fines in the tax systems,provided that the following
Registration with ZATCA.
Submitting all tax returns that must be submitted.
Paying the total tax debt principal resulting from submitted returns or apply for installment and follow the approved installment plan, until the end of this initiative on 31 December 2025.
"The taxpayer shall be exempted from late filing fines on tax return which must be filed to ZATCA before the effective date of the Initiative's extension on 1 July 2025 for all tax systems, provided that the following conditions be met:"
Submitting outstanding tax returns that need to be submitted.
Paying the total tax debt principal resulting from late payment fines or apply for installment and follow the approved installment plan, until the end of this initiative on 31 December 2025.
"The taxpayer shall be exempt from late payment fines associated with tax returns due to ZATCA before the effective date of the Initiative's extension on 1 July 2025 for all tax laws, whether the unpaid amount resulted from disclosure by the taxpayer or reassessment by ZATCA, provided:"
Paying the total tax debt principal resulting from the late of payment or apply for installment, and follow the approved installment plan, until the end of this initiative on 31 December 2025.
The taxpayer shall be exempt from the fine of correcting VAT returns, whether the correction was made by the taxpayer as a result of disclosure thereby or as a result of an amendment by ZATCA, associated with a tax return that must be submitted to ZATCA before 1 July 2025 provided:
Paying the total tax debt principal resulting from the corrected return or apply for installment and follow the approved installment plan, until the end of this initiative on 31 December 2025.
Exemption from fines for violations of VAT field detection and E-invoicing, based on Article 45 of the VAT Law, which was committed before 1 January 2025, provided :
Submit all returns that must be filed.
Paying the total tax debt principal resulting from submitted returns or apply for installment, and follow the approved installment plan, until the end of this initiative on 31 December 2025.
The request for installment dues can be submitted before the end date of the initiative while adhering to the approved installment plan, without being canceled as a result of non-commitment to pay the installments on time. When the installment plan approved by ZATCA is canceled during or after the end of the period of this initiative, all fines that have been exempted from it and related to the principal unpaid tax will be imposed.
Tax Due Installment Steps
The taxpayer shall submit tax due installment request to ZATCA during the initiative period.
The installment request is to be reviewed and approved by the competent team in ZATCA to ensure the taxpayer is qualified for the installment plan.
The payments shall be scheduled under specific periods as per the procedures and conditions of the tax due installment.
In case of cancellation of the installment plan by ZATCA, as a result of taxpayer non compliance of the installments plan, ZATCA shall calculate all the fines due to the unpaid amounts as of the original payment due date.
Note: All payable dues after the end of this Initiative, according to the installment plan approved by ZATCA, will be exempted from late payment fines, provided that the installment plan is adhered to and not canceled by ZATCA due to non-compliance with payment of the installments.
Field Detection Violations Included in the Initiative
The violations are divided into the following:
The value added tax (VAT) violations as per the common provisions, including:
Failure to comply with issuing tax invoices.
Failure to maintain the accounting invoices, records and documents through the maintenance period specified in the regulation.
Lack of compliance in including all tax invoices requirements in the invoices or credit and debit notes
Failure to issue or provide the credit and debit notes to the client.
Prevention or hindering ZATCA employees from performing their functional tasks and duties.
Incorrect calculation of the tax due.
Violation of any other provision of the VAT Law or Regulation.
VAT violations of the E-invoicing Provisions, including:
Failure to issue and maintain invoices and notes electronically.
Failure to comply with maintaining E-invoices and notes according to the requirements provided in the Regulation.
Failure to inform ZATCA of any malfunctions that hinder the process of issuance of e-invoices and notes.
Failure to include the QR code in the e-invoice.
Inclusion of the prohibited functions in the E-invoicing system used to issue and maintain the invoices electronically.
Deletion or amendment of the E-invoices and notes after issuance.
Violation of any other provision of E-invoicing and implementing resolutions.
Illustrative Examples of the Initiative
Example 1
Saad has an establishment for selling fragrances, he was late in submitting the VAT return of Q3 2021. Saad desires to benefit from the recent exemption initiative; therefore, he has submitted his returns to ZATCA and paid the tax dues through the specified period to benefit from the exemption, which will end on (31 December 2025).
The establishment fines due
Submitting tax return delay fine = up to 25% of the tax to which the establishment shall declare.
Tax due late payment fine = 5% of the unpaid tax amount of each month or a part thereof until the actual payment.
Explanation
The establishment shall be exempted from the previous fines, due to the payment of the tax due through the initiative specified period to benefit from the exemption.
Example 2
A soft drink company has delayed to pay tax dues of the excise tax returns for the 2024 (January / February) tax period (1), which shall be paid by (15 March 2024) . And afterextending the initiative from July 1, 2025. The company has desired to benefit from the initiative and paying the tax due on time to be eligible for the Exemption of Fines Initiative.
The establishment fines due
Late payment fine on the unpaid tax due= 5% of the unpaid tax amount of each month or a part thereof until the actual payment.
Explanation
The taxpayer will be benefited from the exemption of the late payment fine, due to the full payment of the tax due principal through the specified period to benefit from the initiative.
Example 3
Fahad is the owner of a coffee shop, and is in compliance with issuing invoices in a legally proper manner; however, he sometimes does not maintain the invoices and documents issued, and some of the invoices have been partly damaged. At the first time, he was notified of the violations, and after 60 days, he has not remedied such violation; hence, another violation and a fine of SAR 1000 has been issued. Fahad has paid the fine before the date of the initiative's effective date, and in the third field visit, it was clear that such a violation has not been remedied. Accordingly, ZATCA has imposed a fine of SAR 5000 before the starting date of the initiative.
The establishment fines due
Issuing two non-compliance violations against Fahad in the amounts of SAR 1000 and SAR 5000 due to the continuation of the same violation, even though six months have passed since Fahad was notified of the violation.
Explanation
The taxpayer may benefit from the extension of the Initiative period during the initiative period concerning the unpaid fine of SAR 5000, provided that all the taxpayer's tax returns shall be submitted to ZATCA. The taxpayer shall have paid the tax due accordingly. In case the taxpayer has any non submitted returns the taxpayer should submit all non submitted returns and pay any principle tax due in order to be exempted from the fine.
Example 4
An establishment operating in KSA has not disclosed its tax obligations with respect to CIT to ZATCA after the auditor performed the regular audit. Consequently, the non-disclosure of tax due in proper time will result in calculating a late payment fine in case ZATCA detects such an amount during the auditing or if the establishment amends the return of the relevant period.
The establishment fines due
Imposing a late payment fine as per the Income Tax Law.
Explanation
The establishment may benefit from the extension of the Initiative period during the initiative period, provided the establishment amends the relevant tax return and disclose and pay the tax due to ZATCA prior to the initiative expiry date. In addition, the establishment may submit a tax due principal installment request to ZATCA, provided that the request shall be submitted during the initiative period. The establishment shall comply with the payment dates agreed with ZATCA as per the approved installment plan.
Example 5
Ali has a supermarket, and he has delayed submitting a number of VAT returns through 2021. And after extending the initiative from July 1, 2025.
He has desired to benefit from submitting the returns and paying the due tax accordingly through the installment scheduling request commencing after the initiative's start date and conclude by end of 31 December 2025.
The establishment fines due
Late filing fine = up to 25% of the tax to which the establishment shall issue a declaration.
Late payment fine on the unpaid tax due= 5% of the unpaid tax amount of each month or a part thereof until the actual payment date.
Explanation
The taxpayer shall be exempt from the fines calculated on his establishment provided that he shall submit all returns and provide an installment request to ZATCA prior the initiative expiry date. In addition, the taxpayer shall comply with the installment plan for all the dues scheduled.