Updated on: Jan 30th, 2024
7 min read
Value Added Tax (VAT) is a popular form of indirect tax levied in more than 160 countries worldwide. The seller charges it from their customers to sell goods and services.
Under VAT Implementing Regulations, the sale of a personal residence is exempt from taxation. However, the sale of a commercial property will be chargeable to tax.
Yes, government supplies are subject to VAT and the responsible person making supplies is required to collect VAT.
Standard VAT rate is applicable upon domestic air tickets, if not part of an international flight.
Almost all goods and services are subject to VAT in Saudi Arabia, except for certain notified financial services and sale of residential property, which have been construed as to exempt services.
The taxpayer must pay VAT if the advances are received against a taxable supply of goods or services. The supplier shall raise an invoice for the value of the advance payments along with VAT.
There is no exemption available for such sales/purchases. However, the applicability of VAT depends upon the seller. If a seller enters into such a transaction as part of his business activity, VAT will apply. In the case of an intermediary, VAT would apply to the commission charged.
Every taxable person whose value of taxable supplies exceeds the threshold of SAR 375,000 are mandatorily required to register on ZATCA (earlier known as GAZT) for VAT. If such supplies exceed SAR 187,500, then they can register voluntarily.
The impact of the VAT will be borne by end consumers. The suppliers must collect VAT on output supplies and deposit with ZATCA after deducting VAT paid on input supplies.
No, registration under VAT does not lead to loss of any kind of competitive advantage. Unregistered suppliers cannot claim a deduction for VAT on input supplies, which increases their cost and makes them at par with registered suppliers.
Yes, imports are also subject to VAT.
Recharge cards are electronic equivalents of cash value. Thus, recharging cards do not constitute supply under VAT, and therefore, VAT is not chargeable.
Residential property given on lease, license or rent falls under zero-rated supplies and does not attract any VAT. However, properties used for commercial purposes, such as offices, hotel accommodations, services, etc., are taxable at the standard VAT rate of 15%.
Renting any property, except residential property, is chargeable to VAT.
ZATCA conducts extensive audits and tax compliance procedures to reduce the number of non-compliant enterprises. Also, ZATCA conducts nationwide campaigns to urge unregistered enterprises to register and imposes fines for non-compliance.
International Financial Reporting Standards (IFRS) are global accounting standards that an entity needs to comply with while recording its financial transaction. Value Added Tax (VAT) is a kind of indirect tax that an entity needs to collect from their customers to sell goods and services. Thus, there is no common link between the two and both are separate systems.
ZATCA (earlier known as GAZT) is the government body in Saudi Arabia responsible for assessing and collecting Zakat and taxes. It oversees:
The ZATCA website contains all the information about VAT. In addition to this, taxpayers can also contact service agents for more information.
For logging into the official website of Zakat, Tax and Customs Authority (ZATCA), a pre-authorised user name is required. If the user was already registered on the old website of GAZT, the same username could be used for registration on the new website.
Yes, if the user cannot complete the registration process immediately, they can save the draft to finish it later.
The user can find more information about VAT on ZATCA’s official website. The user can contact a VAT customer service agent through social media channels for further inquiries.
If any conflict arises between the Provisions of VAT Law and Regulations and contents on ZATCA’s website, VAT Law and Regulations will prevail.
For filing the VAT return, the user needs to create an account and log in to ZATCA’s website. The user can then fill the return and send the same to receive back the invoice.
Users can use deductions or add-on-notices to amend any VAT declared wrongly in previous invoices.
Yes, the tax invoice should mandatorily include the name and address of the supplier and the customer. However, in the case of a simplified e-invoice (B2C transactions), the buyer’s details are not required to be included in the e-invoice.
Tax invoices should include all the requirements specified in Article 53 of the VAT Implementing Regulations.
SADAD, basically, refers to the tax invoice generated for tax payment by ZATCA after the taxpayer filed the return. SADAD includes an invoice number and the amount of tax due, corresponding to which the taxpayer needs to make the payment to ZATCA’s bank account through an online payment gateway or ATM. Post payment, the taxpayer will receive a receipt of the amount along with a Tax Return Reference Number.
The maximum limit of attachment in the tax return is 1 MB.
Taxpayers have the option to escalate their objection to the tax committee for resolution of objection through the General Secretariat of Tax Committees for reconsideration. The main responsibility of the tax committee is the resolution of disputes.
An objection will be resolved within 90 days from its submitted date.