ZATCA Penalty Waiver and VAT Fine Objection in Saudi Arabia

A restaurant in Jeddah filed its VAT return two weeks late, paid the tax 40 days after the due date, and then amended the return when the accountant found invoices that had been left out. A few weeks later three fines arrived: late filing, late payment and return correction. The owner asks: should I pay or object?

You have two routes, and they do not exclude each other. The first is the fines cancellation initiative that the Minister of Finance extended to 31 December 2026. It covers fines for late registration, late payment and late filing, and the VAT return correction fine, if you meet its conditions, mainly paying the principal tax. The second is an objection to the penalty decision itself: a grievance to ZATCA within 60 days, then a lawsuit before the first-level circuits of the Zakat, Tax and Customs Committees within 30 days if the grievance is rejected.

What are the VAT penalties in Saudi Arabia?

A fine does not cancel the tax itself (Article 46). If the same violation is repeated within three years after the previous penalty became final, the fine may be doubled (Article 47). ZATCA imposes penalties under a classification issued by its board, by decision of the Governor or his delegate (Article 48).

Does the ZATCA penalty waiver initiative cover my fine?

ZATCA announced a Minister of Finance decision extending the initiative for six months from 1 July 2026 to 31 December 2026. It waives fines for late registration, late payment and late filing under all tax laws, and the VAT return correction fine. The conditions:

• You are registered with ZATCA for the relevant tax.
• You have filed all required returns.
• You pay the full principal tax. You may ask to pay it in instalments during the initiative and must then pay each instalment on time.

The initiative does not cover tax evasion fines, fines under Article 45 of the VAT Law, fines paid before the initiative started, or fines linked to any return due after 30 June 2026. A fine for not keeping records or for obstructing an inspector is outside it; your route there is an objection.

There is also a route in the law itself: Article 42(2) allows ZATCA, under controls set by its board, to waive or reduce the 50% fine for an incorrect return.

Who decides an objection to a VAT fine?

Article 49 of the VAT Law, as amended by Royal Decree M/52 of 1441H, allows anyone affected by a ZATCA decision to object under the Rules of Work of the committees. Royal Decree M/113, which issued the VAT Law, made the competent judicial body the Income Tax Law committees, today the first-level and appellate circuits of the Zakat, Tax and Customs Committees. Article 3 of the Rules of Work of the Zakat, Tax and Customs Committees (Royal Order No. 25711 dated 8/4/1445H) gives the zakat and tax circuits jurisdiction over violations, public and private right claims and objections to ZATCA decisions. You do not go to the Board of Grievances or the general court.

What are the deadlines to object to a VAT fine?

1. Grievance to ZATCA within 60 days from the day after notification of the penalty decision. ZATCA decides within 90 days.
2. After rejection, partial acceptance or 90 days without a decision: 30 days to sue before the first-level circuits, or to request referral to the internal settlement committee.
3. If settlement fails: 30 days from notice of the internal committee decision to sue.
4. Appeal within 30 days from the day after receiving the first-level decision, unless the amounts do not exceed SAR 50,000, in which case the decision is final.

These periods are in Articles 5, 33 and 34 of the Rules. If you miss the grievance or lawsuit deadline, the decision becomes protected (Article 6).

How do I build a strong objection?

The circuit looks at whether the decision is correct: did the violation really happen, and was the fine calculated on the right legal basis? Collect:

• Filing and payment dates from your ZATCA account and bank transfer receipts.
• ZATCA's fine calculation and your own calculation under the article applied.
• For a correction fine: proof that the error did not lead to less tax than due, or that the amendment was in ZATCA's favour.
• All correspondence and any audit or notification letters.

Tax of SAR 80,000 was paid 40 days late. Article 43 charges 5% for each month or part of a month, so the delay counts as two months: SAR 4,000 plus SAR 4,000, total SAR 8,000. If the business is registered, has filed all returns and pays the principal, this fine falls within the initiative, as long as the related return was not due after 30 June 2026 and the conditions are met before 31 December 2026.

Practical steps for both sides

If you are the business that received the fine:

• Classify the fine first: is it within the initiative, or under Article 45 or evasion and therefore outside it?
• If covered, file missing returns and pay the principal, or request instalments, before 31 December 2026.
• If not covered or the decision is wrong, file a grievance within 60 days. Do not wait for a future initiative.
• Keep invoices and records for the full legal period; record-keeping fines are outside the initiative.

If you are the accountant or service firm that files the returns:

• Keep a calendar of filing and payment dates for each client; late fines start on day one.
• Document every amendment to a return and its reason before filing it.
• Tell the client in writing about any fine as soon as it is issued, with the last day for the grievance.
• State in your service contract who bears a fine caused by either side's delay.

This is general information based on the official Arabic texts of Saudi laws, which prevail over any translation. It is not legal advice for your specific case.

If you received a tax fine and are not sure whether the initiative covers it or you need to object, send the decision and your filing and payment dates on WhatsApp and we will look at them with you.