SAUDI ARABIA TAX ALERT | Relaunch of the Tax Penalties Exemption Initiative (January - June 2026)
ZATCA has relaunched the Tax Penalties Exemption Initiative, effective January 1 to June 30, 2026, offering taxpayers a renewed opportunity to regularize their tax positions.
Why This Matters
The initiative provides an opportunity to waive penalties that can be material in value and recurring in nature. It is particularly relevant where historical issues exist but have not yet crystallised into disputes or assessments.
Key Points
- Scope: Waivers apply to penalties for late registration, late filing or payment, VAT return corrections, and violations identified during field audits (including e-invoicing and VAT compliance).‑invoicing and VAT compliance).
- Eligibility: Taxpayers must be registered with ZATCA, submit all outstanding returns, provide accurate disclosures, and settle principal tax liabilities. Instalment requests must be filed within the initiative period.
- Exclusions: Principal tax amounts, penalties paid before the initiative, and cases under litigation unless the principal tax is settled and the case is withdrawn.
- Coverage Period: Only penalties related to returns due before January 1, 2026, qualify.
Point of View
The initiative should be approached as a planned compliance exercise rather than a routine filing task. Companies should begin by reviewing historical filings to identify penalties within scope and confirm that eligibility conditions can be met, including filing outstanding returns and settling principal tax. Returns, disclosures, and payments should be coordinated and completed in sequence during the initiative period, particularly where multiple tax types, audit-related penalties, or e-invoicing matters are involved. For both multinational and domestic groups, local actions should be centrally coordinated to ensure consistency of disclosures and overall tax positions.
Recommended Actions
Given the June 30, 2026, deadline, companies should initiate a structured review process no later than Q1 2026 to allow sufficient time for execution. Recommended steps include:
- Conduct a diagnostic review of historical VAT, Withholding Tax, and Corporate Income Tax filings.
- Identify and prioritise penalty-exposed areas, such as VAT corrections and e-invoicing.
- Reconcile tax positions with underlying data and systems.
- Prepare and submit outstanding or corrective returns.
- Settle principal tax liabilities or submit instalment requests.
- Remediate e-invoicing compliance and system configuration gaps.
- Centralise oversight to ensure consistency of approach across group entities.
