ZATCA Tax Amnesty 2025: Penalty Cancellation & Fine Exemption Extended Till June

The Zakat, Tax and Customs Authority (ZATCA) in Saudi Arabia has a “Cancellation of Fines and Exemption of Financial Penalties” initiative, commonly known as a tax amnesty program. This program was aimed at relieving taxpayers from various tax-related fines and penalties, mitigating the financial burden, and promoting voluntary compliance. The tax amnesty initiative began in March 2020, was relaunched on June 1, 2022, and has been extended most recently till 30 June 2025.

The initiative covers five major tax systems administered by ZATCA: Value Added Tax (VAT), Corporate Income Tax, Withholding Tax, Real Estate Transaction Tax (RETT), and Excise Tax. Under the KSA's Cancellation of Fines program, eligible taxpayers are granted full exemption from a wide range of financial penalties, including late registration fines, late filing penalties, delayed payment charges, VAT return correction fines, and violations related to VAT field inspections and e-invoicing requirements. 

Key Takeaways: ZATCA Tax Amnesty

Saudi Arabia'sTax Amnesty Program: Timeline

The Zakat, Tax and Customs Authority (ZATCA) launched its tax amnesty initiative to support taxpayers and improve compliance during economic disruption.

Initial Launch – March 2020: Introduced as part of COVID-19 relief and waived penalties for late tax filings, payments, and corrections. The window ran from 18 March to 30 June 2020, later extended to 30 September 2020. 

Program Reinstatement – June 2022: Reset eligibility fines paid before this date were excluded. Enabled taxpayers to settle past obligations without penalties.

Multi-Phase Extensions – 2022 to 2025: The initiative has been extended in six-month cycles:

• December 2022 – May 2023: First extension.
• June 2023 – November 2023: Second extension.
• December 2023 – June 30, 2024: Third extension.
• July 1 – December 31, 2024: Extended under Ministry of Finance Resolution No. 1352.
• January 1 – June 30, 2025: Current extension, approved 29 December 2024; final window for penalty-free compliance.

What is ZATCA Tax Amnesty Program?

The ZATCA Tax Amnesty Initiative, formally known as the "Cancellation of Fines and Exemption of Financial Penalties" program, is a temporary relief measure launched by the Zakat, Tax and Customs Authority (ZATCA) in Saudi Arabia. Its core objective is to help taxpayers including individuals, businesses, and organizations settle their outstanding tax obligations without incurring financial penalties. 

The initiative waives fines related to late tax registration, delayed return submission, late payments, VAT return corrections, and various violations detected during field audits and e-invoicing inspections, provided that taxpayers rectify their compliance status within a specified window. 

This initiative is part of Saudi Arabia's broader efforts to support economic recovery and promote a compliant tax culture across the Kingdom. During the amnesty period, taxpayers who register for required taxes, submit all outstanding returns, and either pay their principal tax liabilities or enter into an approved instalment plan are eligible to have all related fines fully canceled. 

Taxes Covered under the ZATCA Penalty and Fine Cancellation Program

The initiative applies to most major taxes administered by ZATCA. All eligible penalties and fines related to any of the following unpaid tax types as of January 1, 2025, are eligible for full exemption, provided you meet the conditions.

• Value Added Tax (VAT)
• Corporate Income Tax (CIT)
• Withholding Tax (WHT)
• Excise Tax
• Real Estate Transaction Tax (RETT)

Duration of the Tax Amnesty Initiative

The current phase of Saudi's Tax Amnesty Initiative is valid from January 1, 2025, until June 30, 2025. That means all eligible unpaid fines and penalties incurred before January 1, 2025, could be fully waived, provided taxpayers comply with the initiative’s conditions on or before June 30, 2025.

Any taxpayer who has not completed all compliance steps—such as filing overdue returns, paying principal taxes, or applying for and following an instalment plan will no longer be eligible for fine cancellation under this initiative.

Example: Missed VAT Returns from 2022

Ali, owner of a small grocery store, failed to submit VAT returns for Q3 and Q4 of 2022. He also didn’t pay the VAT due. By June 2025, he submits the overdue returns and pays the principal VAT amount.

Result: Ali is exempted from the late filing and late payment fines, which could have been more than 30% of his tax bill. He saves thousands of riyals by acting within the initiative window.

Eligible Fines and Penalties for Exemption and Cancellation

The ZATCA Fines and Penalties exemption initiative provides full exemption from a broad range of tax-related fines for taxpayers who regularize their tax positions. This applies to both individuals and businesses across all major tax types governed by ZATCA, including VAT, Excise Tax, Withholding Tax, Income Tax, and Real Estate Transaction Tax (RETT).

Below is a detailed explanation of fines eligible for exemption:

Late Tax Registration Fines

Failing to register for a required tax on time (e.g., VAT or Excise) results in a fixed penalty such as SAR 10,000. Under the initiative:

• If the taxpayer registers during the amnesty period and satisfies all related conditions,
• Then the late registration fine is waived in full.

Example: A business that exceeded the VAT threshold in 2022 but never registered can register now and avoid the SAR 10,000 fine by meeting initiative conditions.

Late Filing of Tax Returns

Delays in submitting tax returns incur fines ranging between 5% and 25% of the due tax, depending on the delay. 

• If all overdue returns are submitted by 30 June 2025,
• Then the late filing fines are fully cancelled.

Example: A retail company failed to file its Q2 2023 VAT return. By filing now and paying the due tax, you avoid the 25% late filing penalty.

Late Payment of Tax

Late payments attract monthly fines of 5% on the unpaid amount. These can add up quickly over time.

• If the taxpayer pays the outstanding tax or enters into an approved installment plan,
• Then all related late payment fines are waived.

Corrections to Filed Returns (Return Amendments)

Corrections that result in increased tax liabilities can incur penalties up to 50% of the additional amount. The penalty would be waived off if the taxpayer voluntarily corrects past returns and pays the additional tax due.

Example: A VAT-registered company discovers underreported sales from 2022. It can correct the return and pay the difference without facing a 50% penalty.

Field Audit Violations

Fines issued during field inspections include:

• Failure to issue proper tax invoices
• Incorrect tax calculations
• Failure to maintain records
• Obstruction of ZATCA officials

The fines related to violations would be cancelled if the issues are corrected and the initiative’s conditions are met by 30^th June 2025.

E-Invoicing Violations

Violations related to Saudi Arabia’s e-invoicing regulations are also covered, such as:

• Not generating e-invoices
• Failing to include QR codes
• Deleting or modifying issued invoices
• Not informing ZATCA of technical issues

Example: A retail store that did not implement e-invoicing faces escalating fines. Once compliance is fulfilled during the initiative, those fines are canceled.

Fines and Penalties Excluded from the Saudi Arabia Tax Amnesty Program

While the amnesty offers generous relief, it is not unlimited. Certain categories of fines are expressly excluded from this initiative to ensure accountability, especially in cases involving fraud or already-settled penalties.

Below are the categories of fines that do not qualify under the current amnesty initiative (valid until 30 June 2025).

Principal Tax Amounts

The amnesty does not cancel the actual tax owed (known as the principal tax). It only applies to fines and penalties. Taxpayers are still required to pay the full tax liability, either immediately or through an approved installment plan.

Example: A business owes SAR 50,000 in VAT for previous years. Even under the amnesty, this principal tax must be paid in full. What is waived are the associated fines for late filing, late payment, or return correction—not the tax itself.

Previously Paid Fines

If a taxpayer paid a fine before the start of the amnesty window, they cannot recover that amount—even if the same type of fine is now eligible for waiver.

Example: A business paid SAR 10,000 in VAT late filing penalties in 2024. This amount remains valid and is not subject to refund, even though similar unpaid fines can now be canceled under the initiative.

Fines on Returns Due After 31 December 2024

Any tax return or payment due in 2025 or later is not eligible for fine cancellation.

Example: A company misses its Q1 2025 VAT return filing (due April 2025). The late filing fine imposed will remain applicable, as it falls outside the amnesty period.

Tax Evasion-Related Fines

If the fine is a result of intentional fraud or criminal behavior, it cannot be waived, even during the amnesty. This includes deliberate actions such as:

• Concealing or not declaring taxable income
• Submitting false data or invoices
• Willful misrepresentation of tax liabilities

Example: A business used fake suppliers to hide taxable transactions and reduce VAT liability. The fine imposed for tax evasion remains payable and is not covered by the initiative.

Non-Tax-Related Violations

Only fines related to ZATCA’s tax systems are eligible. Penalties issued by other government entities (e.g., labor law, municipal fines) are outside the scope of this initiative.

Conditions to Qualify for ZATCA’s Fine Exemption

To benefit from ZATCA’s fine cancellation initiative, taxpayers must meet the following three conditions during the initiative period (1 January – 30 June 2025):

1. Register for Required Taxes: If you were required to register for a tax (e.g., VAT, Excise Tax) and did not, you must register during the initiative period.
2. Submit All Pending Tax Returns: You must file all tax returns due on or before 31 December 2024. This includes unfiled or incorrect VAT, income tax, Zakat, withholding tax, excise, and RETT returns. Corrections to previously filed returns must also be made.
3. Pay Outstanding Principal Tax or Enroll in an Installment Plan: You must pay the full principal tax due. If you cannot pay in full, apply for an installment plan before 30 June 2025. Approved plans must be followed strictly. Late payment fines on approved instalments extending beyond June 2025 will also be waived—if payments are made on time. If defaulted, penalties would be reimposed.

Steps to Get Your Fines and Penalties Cancelled

If your business or individual tax profile includes payable fines and penalties up to 31 December 2024, now is the time to get it waived. The ZATCA Tax Amnesty Initiative, effective until 30 June 2025, offers a clear path to eliminate past penalties—if the right steps are followed. 

Here's a simplified step-by-step guide to help you take full advantage of this opportunity:

1. Review Your Tax Compliance Status: Conduct a full review—either personally or with your accountant—to identify:

• Unregistered taxes (e.g., VAT, Excise)
• Unfiled tax returns (VAT, CIT, WHT, RETT, Zakat)
• Outstanding tax payments or notified fines

Note: Check any communications from ZATCA, as they highlight penalties or missing filings.

2. Register for Any Unregistered Taxes: If your business should have been registered for a tax (e.g., VAT after exceeding the revenue threshold), complete your registration through the ZATCA online portal. Without registration, related fines cannot be waived.

3. File All Outstanding Returns: Submit any missing returns for VAT, Excise, Income Tax, Withholding Tax, or Real Estate Transaction Tax. Correct any previously filed returns with errors. Use the ZATCA portal for filing or amendments.

4. Calculate and Pay the Tax Principal: Determine the total tax amount owed. This must be paid in full using SADAD or another ZATCA-approved payment method. If full payment isn’t possible, move to the next step.

5. Consider an Instalment Plan: If you need more time to pay, apply for an installment plan through the ZATCA portal before 30 June 2025. Once approved:

• Follow the payment schedule exactly
• Avoid any delays or missed payments

Note: Defaulting on the instalments would cancel the amnesty benefits.

6. Verify Fine Cancellation: After fulfilling the above steps, log into your ZATCA account to confirm that applicable fines have been canceled or reduced. Save all confirmation documents for your records.

Conclusion

The ZATCA Tax Amnesty Initiative, currently active until 30 June 2025, presents a critical opportunity for taxpayers in Saudi Arabia to resolve past non-compliance without incurring financial penalties. 

However, it’s important to understand that the amnesty does not apply to all penalties. Fines resulting from tax evasion, those already paid before 2025, and violations on obligations due after 31 December 2024 are excluded. Moreover, the initiative waives penalties only, not the actual tax amounts due. Taxpayers must act before the 30 June 2025 deadline to benefit, as penalties will resume from 1 July 2025. For most, this the final chance to clear their tax record without financial consequence making timely action not just advisable, but essential.