A significant update from the Zakat, Tax, and Customs Authority (ZATCA). On February 17, 2025, ZATCA issued a tax bulletin outlining the mechanism, requirements, and obligations for applying for VAT refunds on expenses incurred by donors for Public Benefit Projects, as per Article 70(a) of the KSA VAT Implementing Regulations.
Public Benefit Projects Definition: ZATCA has specified that VAT refunds apply to projects that involve the establishment, construction, demolition and reconstruction, restoration, or expansion of mosques, health centers, educational facilities, and similar public benefit projects. The project must be fully donated to the competent authority in Saudi Arabia upon completion.
Eligibility for VAT Refund:
- The donor must register with ZATCA as an ‘Eligible Person’ to qualify for the refund.
- The donor is required to submit a contract/agreement between themselves, the competent authority, or a third party.
- ZATCA retains discretionary power to approve or reject applications for VAT refunds.
Application Timeline
- Donors must submit their VAT refund application within six (6) months from the end of the calendar year in which the expense was incurred.
- Any failure to file within this timeline will result in the loss of eligibility for the VAT refund.
- Important Update: Donors can also claim VAT incurred on qualifying projects since VAT introduction in 2018, provided they submit their refund application before June 30, 2025.
This initiative by ZATCA is a welcome move and is expected to encourage charitable activities and donations for public benefit projects. We encourage all eligible donors to review their VAT records and take the necessary steps to submit their claims before the deadlines.
Should you require further assistance in assessing your eligibility or filing the refund application, please feel free to contact us.
