Saudi Arabia has introduced a new Value Added Tax (VAT) refund policy for tourists, which became effective on April 18, 2024. This initiative allows international visitors to reclaim the 15% VAT paid on eligible goods and services during their stay, marking a significant move to enhance the country’s appeal to global travelers. The Zakat, Tax and Customs Authority (ZATCA) implemented this measure as part of broader amendments to the VAT Regulation.

Officials from ZATCA stated that this update is part of a wider economic strategy designed to support non-oil sectors and stimulate consumer spending within the Kingdom. They emphasized that the VAT refund system is expected to encourage foreign visitors to spend more, improve their shopping experience, and align Saudi Arabia’s tourism policies with international best practices seen in countries like the UK, France, and Japan.

According to the new policy, tourists who purchase goods and services from approved suppliers will be eligible to reclaim the 15% VAT at the time of departure. Although tourists will pay the tax upfront, refunds will be processed through a structured system managed by ZATCA and its authorized service providers. These providers will verify receipts, process claims, and ensure compliance with eligibility criteria, making both tourists and service providers jointly accountable for any improper claims.

The initiative also ensures that tourists from Gulf Cooperation Council (GCC) countries will receive the same treatment as those from outside the region until the anticipated Electronic Services Law is enacted. This interim measure aims to provide consistency in the treatment of all non-resident visitors, enhancing regional tourism.

The governor of ZATCA has been authorized to issue specific guidelines for the VAT refund scheme. Reports suggest these guidelines will cover essential aspects such as lists of eligible goods and services, definitions of tourist status, minimum purchase requirements for claiming refunds, and criteria for businesses to become approved suppliers. Stakeholders in tourism are optimistic that these guidelines will allow travel agencies, hotels, and retailers to incorporate the refund process into their customer service offerings.

Experts in tourism believe this VAT refund initiative is a strategic effort to enhance Saudi Arabia’s competitiveness in the global travel market. The policy is expected to attract shoppers and travelers who consider tax savings when choosing a destination, especially from high-value markets including China, Southeast Asia, Europe, and the United States.

Domestic businesses in the retail, hospitality, and tourism sectors are poised to benefit from this new VAT refund system. Companies that become approved suppliers are likely to see increased engagement and spending from tourists. Economic advisors recommend that businesses prepare by updating invoicing systems, training staff about VAT refund eligibility, and incorporating tax savings into their marketing strategies.

In addition to the tourist refund program, ZATCA has clarified new procedures related to the transfer of economic activities between businesses. Any company transferring operations or assets must notify ZATCA within 30 days, unless they have already deregistered from the VAT system. Deregistered businesses must retain all tax-related documentation to ensure compliance.

The global travel community has shown interest in Saudi Arabia’s VAT refund program, anticipating more affordable shopping experiences for international tourists. The inclusion of GCC countries in this program could boost regional tourism and cross-border leisure travel, reducing friction among travelers across the Gulf.

Travel economists predict that the VAT refund will influence tourists’ spending behavior, leading to higher discretionary spending on luxury goods, dining, and cultural experiences. Tourists may be more inclined to indulge in upscale accommodations and activities, knowing they can claim part of their expenses back.

This VAT refund policy aligns with Saudi Arabia’s Vision 2030 objectives, which aim to diversify the economy and reduce dependence on oil revenues by investing in sectors like tourism and culture. Officials believe that financial incentives such as VAT refunds will be crucial in attracting more visitors to the Kingdom.

As the new system becomes operational, both tourists and businesses will need time to adjust. Industry leaders expect a transitional period where ZATCA will offer education, support, and digital tools to aid compliance. The success of the VAT refund program will be assessed by increases in tourist arrivals, average spending, participation from retailers, and traveler satisfaction. If effectively implemented, this initiative could set a regional benchmark for tax and tourism policy integration, further establishing Saudi Arabia as a recognized global tourism destination.