Saudi Arabia’s new VAT exemption for tourists comes into effect

Riyadh : Tourists visiting Saudi Arabia will now be eligible for a refund on the 15 per cent Value Added Tax (VAT) they pay on goods and services during their stay. The new VAT exemption came into effect on April 18. The Zakat Tax and Customs Authority (ZATCA) announced amendments to the VAT Regulation to facilitate this.

According to the updated regulations, the VAT rate will be zero per cent on eligible tourist purchases from approved service providers. Tourists will then receive a refund of the VAT amount paid when they depart from Saudi Arabia.

ZATCA will authorise specific service providers to handle the tax refund process for tourists. Saudi Gazette said in a report that these approved providers will share responsibility with the tourist for any refunds found to be improperly claimed.

Until the Electronic Service Law is implemented, tourists from other Gulf Cooperation Council (GCC) countries will be treated the same way as tourists from outside the GCC for VAT refunds.
The governor of ZATCA has been authorised to issue the necessary guidelines for the tourist VAT refund scheme. These guidelines will detail the implementation process, define tourist eligibility criteria, specify the types of goods that qualify for a refund, set minimum purchase values, outline the requirements for businesses to become approved suppliers, and describe the application process for refunds.

In a separate update to the VAT regulations, ZATCA clarified the process for transferring economic activities. Businesses transferring their operations to another entity must notify ZATCA within 30 days of the transfer date unless the transferring business has already deregistered for VAT.

The authority also emphasised that businesses whose VAT registration has been cancelled must maintain all required invoices, records, and documentation. Deregistration does not relieve them of any outstanding VAT obligations.

Furthermore, the amended regulations state that if the transfer of economic activity does not fully comply with the conditions, including proper notification to ZATCA, the goods and services involved in the transfer will be considered taxable.