1Third Version | May 2026

2. The penalty is increased by 10% if the taxpayer’s compliance record is very weak. 3. The penalty is increased by 5% if the taxpayer’s compliance record is weak. 4. The penalty is increased by 5% if the percentage of the difference between the calculated and due Tax, payable or refundable, related to all periods subject to amendment, exceeds 20% for returns related to monthly tax periods, or 40% for returns related to quarterly tax periods. Second: Reduction of the Penalty ZATCA may reduce the penalty associated with the violation of “submitting an incorrect Tax return, amending a Tax return after submission, or submitting any document to ZATCA related to the Tax due, resulting in an underpayment of the Tax amount” down to 0%, in the event that one or more mitigating factors apply, as follows: 1. The penalty is reduced by 5% if the taxpayer’s compliance record is good. 2. The penalty is reduced by 5% if the percentage of the difference between the calculated and due Tax, payable or refundable, related to all periods subject to amendment, is less than 5% for returns related to monthly tax periods, or less than 15% for returns related to quarterly tax periods. 3. The penalty is reduced by 10% if the taxpayer settles the difference between the calculated and due Tax within 30 days of the assessment decision issued by ZATCA. 4. The penalty is reduced by 15% if the taxpayer is classified as a microenterprise. For the purposes of these rules, a microenterprise is defined as one whose annual taxable revenues do not exceed SAR 3,000,000 during the twelve months preceding the tax period under review and assessment. 5. More than one mitigating factor may not be combined, except for the payment-related factors specified in these rules. 6. As an exception, the provisions of this section (Second) do not apply to cases where the error in the return is related to a case of tax evasion for which a decision has been issued by the ZATCA. Third: Rules for Determining Taxpayer Compliance ZATCA determines the taxpayer’s compliance based on the number of errors in prior Tax returns regarding timely submission of returns or timely payment of due Tax, as follows: 1. The taxpayer is deemed to have a good compliance record if no violations have occurred during the preceding twelve months. 2. The taxpayer is deemed to have a weak compliance record if, for monthly filers, more than two and up to six violations occurred during the last twelve months, or for quarterly filers, one or two violations occurred during the last twelve months. 3. The taxpayer is deemed to have a very weak compliance record if, for monthly filers, more than six violations occurred during the last twelve months, or for quarterly filers, more than two violations occurred during the last twelve months.