ZATCA Extends Tax Penalty Waiver Until End of 2026

The Zakat, Tax and Customs Authority (ZATCA) has extended its “Cancellation of Fines and Exemption of Financial Penalties” initiative until 31 December 2026, giving businesses — including small and medium enterprises — more time to settle their tax positions without incurring penalties. The extension will run through two consecutive six-month periods in 2026.

The initiative covers penalties linked to corporate income tax, withholding tax, value-added tax (VAT), excise tax, and the real estate transaction tax (RETT). Waived fines include late registration penalties under all tax systems, late payment penalties, late filing penalties, VAT return correction penalties, and certain VAT field-detection and e-invoicing violations — such as QR code issues, missing invoices, and prohibited system functions — provided they are corrected during the initiative period.

To qualify, a taxpayer must be registered with ZATCA for the relevant taxes, submit all required and outstanding returns, and either pay the principal tax amounts in full or obtain an approved installment plan and keep payments on schedule. Compliance must be maintained throughout the period, as non-compliance can disqualify the waiver.

Some penalties remain excluded, including tax evasion penalties, penalties under Article 45 of the VAT Law, fines already paid before each waiver period took effect, and penalties tied to returns due after 30 June 2026. Notably, the waiver does not apply to any return whose legal due date falls after 30 June 2026, even though the initiative itself runs to the end of the year.

The relief is available to all registered taxpayers, with no separate SME-only rate. For smaller businesses, the main benefit is the cancellation of variable penalty percentages — late-filing fines, for example, commonly range from 5% to 25% of unpaid tax and are waived once the conditions are met. The move is intended to support business continuity and encourage investment.

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