The Zakat, Tax and Customs Authority (ZATCA) issued important clarifications regarding the extension of the initiative to cancel fines and exempt from financial penalties, confirming that it will continue to be implemented for a new period starting from January 1 and extending until June 30, 2026. This extension comes within the framework of the Authority’s keenness to enable taxpayers to correct their tax situations and comply with the applicable regulations and rules.
Cases excluded from the initiative
According to the simplified procedural guide issued by the authority, three main cases have been identified that do not fall under the umbrella of exemption, namely:
- Fines already paid: The initiative does not include any fines that have already been paid before the effective date of this initiative, as the amounts paid are not refunded.
- Tax evasion offenses: Penalties for tax evasion offenses are entirely waived, as these are serious offenses that undermine the integrity of the tax system. These offenses include submitting false documents or concealing material information with the intent to reduce tax liability.
- Future declarations: The initiative does not include fines for declarations that must be submitted to the Authority after December 31, 2025, in order to encourage future compliance with regulatory deadlines.
Scope of the initiative and types of taxes covered
The initiative covers a wide range of tax obligations, providing a significant opportunity for businesses to resolve outstanding issues. The exemptions include five main types of taxes:
- Value Added Tax (VAT).
- Withholding tax.
- Selective tax.
- income tax.
- Real estate transaction tax.
The economic context and the importance of the initiative
This initiative is of paramount importance in the Kingdom's current economic context, as it was originally launched as part of the economic stimulus package intended to mitigate the financial and economic impacts of the COVID-19 pandemic. The initiative has proven effective in supporting the cash flow of small and medium-sized enterprises (SMEs), sparing them additional financial burdens that could hinder their growth.
Furthermore, the initiative contributes to strengthening the principle of “voluntary compliance,” encouraging taxpayers to disclose all financial transactions and correct previous returns without fear of accumulating penalties. This approach directly benefits the national economy by increasing the efficiency of tax collection and reducing litigation between the authority and taxpayers.
Call to take advantage of the deadline
The Authority called on all taxpayers subject to tax regulations to quickly take advantage of the granted period, and to ensure that all due returns are submitted and the original tax is paid in order to benefit from the full exemption from fines according to the conditions explained, which enhances their financial stability and regulatory position.
