Adding or removing a tax group member, or disbanding the group

A tax group is not fixed at the date of its formation. Article 4 of the VAT Law leaves to the Implementing Regulations the terms and conditions by which a Tax Group may register, amend its registration or cancel it. Article 12 of the Regulations sets out those rules. ZATCA Board Resolution No. (01-06-24), published in the Official Gazette on 18 April 2025, amended Paragraph (7) of Article 12. The other paragraphs of Article 12 were not amended by that Resolution.

Two routes to change should be distinguished: changes that arise from events, which must be notified, and changes the group itself chooses to make, which require an application.

Changes arising from events: notification within twenty days

Article 12(1) provides that where any information originally stated in the application changes, or where any member of the Tax Group is no longer eligible to form part of the Group, the Tax Group representative must give notification within twenty (20) days of the change taking place.

This obligation should be read with amended Article 10(2), which requires all eligibility requirements in Article 10(1) to remain fulfilled by all members throughout the period of the group’s registration. A change in ownership, a special zone licence, or refund eligibility may therefore trigger the notification requirement.

Under Article 12(2), the removal of a legal Person from the Tax Group, or the disbanding of the group, arising due to such an event takes effect from the date that legal Person is no longer eligible to form part of the Tax Group, or from the disbanding date.

Changes the group chooses: application by the representative

Article 12(3) provides that, subject to the approval of all group members, the Tax Group representative may file an application on behalf of the group to:

• add new members to the group;
• remove existing members from the group;
• disband the group; or
• change the Tax Group representative.

Under Article 12(4), changes resulting from such an application take effect from the date the request is made, unless the Authority specifies an alternative effective date. A new member must, of course, satisfy each condition in amended Article 10(1).

The position of a member that leaves or a group that disbands

Article 12(5) addresses a member that leaves the group, or a group that disbands, where the individual member remains eligible to be a Taxable Person in its own right. A new Tax Identification Number is issued to that member if it had no Tax Identification Number before joining the group. Such members are not considered to have deregistered and are deemed to have a continued registration status.

Article 12(6) addresses the reverse case. Where the individual member is not eligible to be a Taxable Person, that Person must deregister, if applicable, with effect from the date it leaves the group or the group is disbanded. Each member of the group remains jointly and severally liable for any tax due upon deregistration and for the rights and obligations of the group while it was a member.

The Authority’s powers under amended Article 12(7)

Under the previous text, the Authority could issue a notice to the representative to set aside the effect of Tax Group status so as to disregard Tax on supplies between members, where the group resulted in a tax advantage contrary to the purpose of the Law and obtaining that advantage was one of the principal or main purposes of the group.

Amended Article 12(7) provides that the Authority may issue a notice to the representative to remove tax group status for any supplies between members of the group, or to cancel the registration of the tax group with effect from any date, earlier or later, where the continuation of the tax group leads or may lead to obtaining tax benefits contrary to the purpose of the Law or the Regulations. The Authority may also exclude one of the members and notify it, while the tax group status remains for the remaining members, where the continuation of that member leads or may lead to such benefits, or where it is proven that the member does not fulfil the conditions for joining the tax group.

Two points of difference from the previous wording are notable. The amended text no longer refers to obtaining the advantage being one of the principal or main purposes of the group. It also expressly provides for cancellation of the group’s registration and for the exclusion of a single member.

Groups imposed by the Authority

Article 12(8), which was not amended, allows the Authority to notify two or more Persons who are not part of any Tax Group, but who are eligible to form one together, that they are considered to be in a Tax Group from any prospective date. Such a notice may only be issued where the separate registration of each Person results or will result in the accrual of a tax advantage contrary to the purpose of the Law.

Instruments relied on: Implementing Regulations, ninth edition, 26/11/1444H corresponding to 15/6/2023G, unofficial English translation, Articles 10 and 12, with Article 10 and Article 12(7) as amended by ZATCA Board Resolution No. (01-06-24) dated 17/05/1446H, published in the Official Gazette (Umm Al-Qura, issue 5082) on 18 April 2025, unofficial English translation; VAT Law, Article 4. The Arabic text prevails.

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