Introduction
In February 2017, the Kingdom of Saudi Arabia (KSA) ratified the GCC VAT framework and imposed VAT on 1 January 2018. VAT was introduced at a standard rate of 5% with certain exceptions.
KSA VAT law was issued including 53 chapters in addition to the provisions of its executive regulations which consists of 12 chapters and 79 articles, as well as FAQs and VAT guidelines regarding various sectors as an additional clarification for certain treatments.
Registration
All persons and businesses liable to register for VAT purposes shall register with the General Authority of Zakat and Tax (“GAZT”) within 30 days from the date of publishing the law (i.e. 30 days from 28 July 2017).
- The taxable person shall be required to register according to his/her economic activities in the Kingdom in accordance with the provisions of the GCC VAT Framework by which:
the taxable person shall be a resident in KSA, and his/her annual value of supplies shall exceed or is expected to exceed the mandatory registration threshold. The mandatory VAT registration threshold is set at SAR 375,000 (~ EUR 89,000). Companies with an annual turnover of less than SAR 1,000,000 (~ EUR 236,500) were initially exempt from the mandatory registration requirement until January 2019, giving small businesses more time to prepare for VAT.
- For non-residents, as stated in the Unified VAT Agreement and the implementing regulations: certain non-residents are required to register if they are obliged to collect and pay VAT on supplies in the KSA:
“A non-resident of a Member State shall be required to register in that State regardless of his/her business turnover, if he/she is obliged to pay tax in that State under this Agreement. Registration can be carried out directly or through the appointment of a tax representative with the consent of the concerned tax authority. The tax representative shall take the place of the non-resident person in all its rights and obligations provided for in this agreement, subject to the provisions of Article 43(2) of this agreement”
“A non-resident person who is not registered with the authority but is obliged to pay tax on supplies made or received by that person in the Kingdom must apply to the authority for registration within thirty (30) days of the first supply on which that person was obliged to pay tax.”
- The requirement to register will not affect all non-residents supplying goods and services to the KSA, as a non-resident is only obliged to collect and pay tax in respect of supplies made to non-taxable customers.
- A common situation where non-residents will be required to register is where non-residents make electronic supplies of services to KSA consumers. Businesses who provide electronic content and services directly to non-registered customers in the KSA are required to collect the KSA VAT due and comply with KSA VAT obligations.
VAT return
- Reporting period to submit
Taxpayers should determine when they need to file their VAT returns and the frequency of their filing obligation according to the volume of their annual taxable supplies.›Up to SAR 40,000,000 (~ EUR 9,414,500): VAT returns on a quarterly basis›More than SAR 40,000,000: VAT returns on a monthly basis
Taxpayers will have a month to submit their VAT returns (i.e. the last day of the month is the due date). If the month’s last day (due date) falls on a non-working day, taxpayers are still liable to submit their VAT and pay any liabilities by that day (unlike other tax types).
Taxpayers can submit their VAT return online. VAT return forms will be available on the “GAZT” portal (which is linked with the SADAD payment system) in the taxpayer’s account on the first day of every filing period.
