The Cancellation of Fines and Exemption of Financial Penalties Initiative expires on 31 December 2026. It allows businesses registered with the Zakat, Tax and Customs Authority (ZATCA) to have accumulated late-filing, late-payment and late-registration fines waived — fines that, in long-standing cases, can exceed the principal tax debt itself.
Two misconceptions cost businesses money here. The first is assuming the initiative will simply be extended again. The second is not realising that several categories of penalty are expressly excluded — including, critically, penalties on returns that fell due after 30 June 2026.
Table of contents
What the initiative is
It is an initiative approved by the Minister of Finance and administered by ZATCA, cancelling fines and exempting taxpayers from financial penalties arising from specified violations, in order to reduce the financial burden on businesses and encourage voluntary regularisation.
It is not a general amnesty. It does not waive the underlying zakat or tax. It waives penalties only, and only where the full principal debt is settled.
The period currently in force
The current period runs from 1 July 2026 to 31 December 2026, per ZATCA’s announcement of 29 June 2026, confirmed by the Saudi Press Agency on 30 June 2026.
A note of professional caution: this initiative has been extended more than once, which has led some businesses to treat it as permanent. Each extension was a separate decision. Planning should be based on the announced date, not on an assumed one.
Penalties covered
| Penalty type | Scope |
|---|---|
| Late registration fines | All tax laws administered by ZATCA |
| Late payment fines | All tax laws administered by ZATCA |
| Late filing fines | All tax laws administered by ZATCA |
| VAT return correction fines | Value Added Tax |
Penalties excluded — where most write-ups go wrong
Four categories are expressly excluded:
- Tax evasion penalties. Never covered.
- Penalties under Article 45 of the VAT Law. Article 45 covers failure to keep invoices, books and records (up to SAR 50,000), obstructing ZATCA staff, and any other breach of the Law or its regulations. All of these fall outside the initiative, which is why they do not appear in the table of waivable penalties below.
- Fines already paid before the initiative took effect. Early payers do not receive a refund.
- Penalties on tax returns that fell due after 30 June 2026.
The fourth exclusion matters most in practice and is routinely omitted from secondary commentary. Returns that became due after 30 June 2026 — including VAT returns for Q3 2026 onward — are not covered, even if the application to benefit is submitted before 31 December 2026. The initiative addresses the past, not the present.
Conditions for benefiting
Three cumulative conditions, with no substitute for any of them:
- Be registered with ZATCA. An unregistered business must register first; the late-registration fine itself is within the scope of the waiver.
- Submit all outstanding returns. Settling liabilities is not enough — the tax file must be complete.
- Pay the full principal debt associated with those returns.
Instalments
The initiative can be used on an instalment basis, provided the instalment application is submitted before 31 December 2026 and all instalments are paid on schedule under the plan approved by ZATCA. Failure to keep to the schedule puts the exemption at risk.
How much is actually at stake?
These are the penalty rates as published on ZATCA’s official violations and fines page:
| Violation | Article | Fine |
|---|---|---|
| Failure to register for VAT within the prescribed period | (41) | SAR 10,000 |
| Failure to file a return on time | (42/3) | 5% to 25% of the tax that should have been declared |
| Failure to pay tax on time | (43) | 5% of the unpaid tax for each month or part month |
| Filing an incorrect return | (42/1) | 50% of the difference between the calculated and the correct tax |
| Repeat violation within three years | (47) | The fine may be doubled |
Note that the table above excludes Article 45 penalties — chief among them the record-keeping penalty — because they are expressly outside the scope of the initiative, as set out above.
Note that the late-payment penalty compounds at 5% per month. A business with SAR 200,000 of VAT principal outstanding for ten months will have accrued late-payment penalties equivalent to 50% of the principal, before adding the late-filing penalty of up to 25%. In that illustration, penalties eligible for waiver approach SAR 150,000 against settlement of the SAR 200,000 principal.
These figures illustrate how the penalties accumulate. Actual amounts are determined from the assessment and tax account held with ZATCA.
What to complete before 31 December 2026
- Extract the liabilities statement from the business’s ZATCA account and schedule every unfiled return and outstanding fine, separating what fell due before 30 June 2026 from what fell due after.
- Review the books for unreported periods. Filing late returns with figures not supported by documentation exposes the business to the incorrect-return penalty of 50% of the difference.
- Reconcile input VAT differences and confirm that tax invoices meet the required conditions before the late returns are filed.
- Quantify the principal due and decide between settlement in full and an instalment plan before year end.
- Submit the application — and the instalment request if needed — before 31 December 2026.
Statutory deadlines that should not be missed again
| Obligation | Deadline |
|---|---|
| Zakat return | Within 120 days of the end of the financial year |
| Income tax return | Within 120 days of the end of the tax year |
| VAT return — monthly | Last day of the following month, where annual supplies exceed SAR 40 million |
| VAT return — quarterly | Last day of the month following the quarter, where supplies do not exceed SAR 40 million |
| Withholding tax return | Within the first ten days of the month following the month of payment |
Late payment of withholding tax carries a penalty of 1% of the unpaid tax for every 30 days of delay.
Frequently asked questions
Does the initiative cover zakat as well as taxes?
The initiative refers to registration, payment and filing fines across all tax laws administered by ZATCA. What applies to a particular business is determined from its account with the Authority and the nature of the obligation giving rise to the fine.
I paid the fine months ago — can I get a refund?
No. Fines paid before the initiative took effect are expressly excluded from the waiver.
I have an open objection against an assessment — can I still benefit?
Benefiting requires payment of the full principal debt, so a dispute over the principal itself complicates the decision. It may be better to resolve the objection first, or to settle, benefit, and continue through the statutory route. The decision weighs the likelihood and expected size of a reduction against the penalty amount that can be waived with certainty — a professional judgement that differs case by case.
Will the initiative be extended beyond 31 December 2026?
That cannot be assumed. The initiative has been extended before, but each extension was a separate decision, and the currently announced date is 31 December 2026.
What is the difference between waiving the fine and instalment of the debt?
Instalment relates to the principal and how it is paid; the exemption relates to penalties. The initiative combines both: the principal may be paid in instalments while penalties are waived, provided the application is submitted before 31 December 2026 and the instalment schedule is met.
What if my business is not registered with ZATCA at all?
Registration is the first condition. An unregistered business registers, then files its returns and settles the principal. The late-registration fine — SAR 10,000 for VAT — is itself within the scope of the waiver.
How we can help
Almousa & Altamimi, Certified Public Accountants and Auditors handles the full regularisation: scheduling the position held at ZATCA, preparing outstanding returns from the books and supporting documents rather than from estimates, and quantifying the waivable amount before the decision to settle or instal is taken — so that correcting the past does not open a new file.
If your business has unfiled returns or outstanding fines, the remaining window is short. See our zakat and tax services, or contact us to review your position before year end.
Quick reference: Glossary · FAQ
Official sources: ZATCA — announcement extending the Cancellation of Fines and Exemption of Financial Penalties Initiative (29 June 2026); Saudi Press Agency (30 June 2026); ZATCA violations and fines page. This content is general guidance and is not a substitute for professional advice on a specific case. Last updated: 14 September 2026.
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