Based on the provisions of the Unified VAT Agreement, KAS issued the Law on VAT according to Royal Decree No. This guide represents ZATCA's views on the implementation of the Unified VAT Agreement, the VAT Law and the Implementing Regulations as of the date of this guide.
Optional VAT registration
During a transition period until 1 January 2019, businesses will only be required to register where the annual turnover exceeds SAR and an application for registration must be submitted no later than 20 December 2017(8). For persons whose turnover will exceed this threshold during 2019, an application for registration must be submitted no later than 20 December 2018.
Place of Supply
- General
- Supplies to Taxable Customers in other GCC States
- Services related with Real Estate
- Electronic Services
- Training Services
- Receipt of services by Taxable Customer in KSA
The place of supply of services relating to Property» is in the country where the Property (including any specific land area and any building or construction works on such land) is located. Since the services relate to a specific area of Property located in the CSA, the place of delivery of the.
Zero-rated Supplies
The benefit of the Services is not received by the customer, or any other Person, while that person is in the KSA. The zero rate should not apply to cases where a contractual relationship exists with a non-resident, but the direct benefits of the services are provided to a person in the KSA. The benefit of the services is received directly by a person in the KSA and the invoice is sent to the Spanish company.
The services do not relate to tangible goods or property located in the KSA during delivery. The supplier must anticipate that the Customer will use the services in the context of activities outside the KSA. The supplier has no evidence that the benefit of the Services will be enjoyed within the KSA territory.
Tax Due Date
General
The actual date of delivery of the goods or services is, in default cases, the date of delivery of the goods or performance of the services. However, specific delivery date rules are prescribed in the common VAT agreement and the implementing regulations(28). The medical consultation is carried out as a one-off treatment, and the date of delivery of the service is therefore the date on which the consultation takes place.
The date on which the delivery takes place may be earlier than the actual delivery date in cases where a tax invoice is issued or payment is received before the actual delivery date. The supplier must comply with VAT obligations based on the date of issue of the VAT invoice. Delivery is deemed to take place on the payment date (in the case of partial payment, delivery is made for that part of the consideration).
Continuous Supplies
Consideration
Disbursement
Typically, a service provider makes a physical payment to the third-party supplier and recovers the paid amount from the customer. In these cases, the recovery of the customer's money does not constitute consideration for a service provided by the service provider. The client is aware of a delivery by a third party supplier and gives (general or specific) authority to the service provider to pay on his behalf;
The costs paid are clearly visible in the commercial documentation, that they are separate and additional to the deliveries made by the service provider to the customer. The payment is not a taxable supply made by the service provider, so the service provider is not subject to any specific legal requirements for issuing tax invoices for this payment. If clear payment documentation is not issued, it may mean that the service provider has himself made a taxable supply in relation to the consideration received.
Reimbursement
However, if the design firm charges an inclusive price for the design, including costs to obtain the municipal certification, this will be a single supply of services, fully subject to VAT. This will reduce potential uncertainty for the supplier, customer or for the Authority during an investigation or any other review of the tax position of any party. However, Global Real Estate must charge VAT at 5% on the entire report, including reimbursement of the costs of the Hong Kong supplier.
If a cost that is reimbursed is part of a larger dominant bid, the reimbursement of that cost will be considered an additional consideration for the dominant bid. The reimbursement of air tickets is not a separate service provided to the Ministry - instead it forms an integral part of the delivery of the project. While the airfares incurred are not subject to VAT or have VAT charged at 0%, the reimbursement of these costs should be charged as an additional consideration to the project fees (and therefore subject to VAT at 5%).
Adjustment to consideration
In this case, the supplier may not make any deliveries for VAT purposes. If a delivery is refused, the supplier provides services, but the customer does not accept the quality or delivery of the services. In a professional services context, it is often difficult to return services to the supplier once they have been received.
ZATCA accepts that if a customer receives some services but rejects them as unsatisfactory (and refuses to make any payment), the supplier does not make a nominal supply of those services for VAT purposes. The supplier should keep a proof of the customer's rejection of the unsatisfactory services to substantiate its VAT report. The reduction of the delivery value is generally an agreement between the supplier and the customer to apply a reduced consideration to the delivery.
Professional events and seminars
Events where delegates pay an attendance fee
Events without payment
However, if other elements were provided which were separate from the seminar itself, such as accommodation or cultural activities (such as a city tour), these will be subject to the rules on nominal supplies. If the event organizer deducts input VAT on the purchase of these goods, it will be necessary to account for output VAT if these goods are supplied to delegates free of charge.
Provision of catering
Financial advisory
General provisions
VAT applies to all financial services provided in KSA by a registered taxable person where the consideration paid in respect of the service is in the form of an express fee, commission or commercial discount (not implied) (41). Explicit compensation or commission is a determinable amount charged to the customer in connection with the service, either as a separate monetary value or as a percentage of a fixed amount. This means that any supply of a financial service will be subject to VAT if the value of that supply can be easily ascertained by a separately charged duty that is expressly defined.
Financial advisory services
Global Contracting
Global Contracting
VAT consequences of supplies under global contracting
The extent of the CSA supplier's activities will determine whether he can apply the zero rate to his invoice. In cases where the Saudi supplier does not provide advice, direct assistance or other direct benefits to a person in the KSA (or has no direct contact with a person in the KSA), and provides services intended for the affiliate entity's use, the direct benefit of the services is provided to the non-resident affiliated entity. Part of the consulting services provided under the global contract consists of making an impact assessment for a potential expansion of the business of the KSA branch of Europe Bank Ltd in Riyadh.
Impact assessment activities are carried out by Global KSA Consultancy, an entity of the Global Consultancy UK group in KSA. However, Global KSA Consultancy consultants work in the KSA Branch of Europe Bank Ltd and provide direct assistance to the KSA Branch teams. KSA Branch of Europe Bank Ltd should self-assess KSA VAT on the invoice issued by Global Consultancy UK through the reverse charge mechanism.
Intercompany charges
- Management Services
- Other Services within the group
- Date of Supply
- Transfer Pricing Adjustments
The VAT arises on the date on which the payment is due (for installment payments), payment or the issue of an invoice, whichever comes first. For group services, physical payment and invoicing may occur at different times than the delivery of the underlying services. As a result, affiliates may make transfer pricing adjustments that adjust the consideration for intra-group transactions to comply with transfer pricing rules.
If a transfer price adjustment takes place with regard to a delivery of goods or services, this will result in the previously agreed consideration being adjusted. If KSA VAT is not due on the underlying supply of goods or services, the adjustment of transfer prices would not require an adjustment of the output tax or the input tax. Further details on the application of the transfer pricing rules under the KSA legislation will be provided in a separate guidance.
12.Input VAT deduction
- General Provisions
- Proportional deduction relating to input VAT
- VAT OBLIGATIONS OF THE TAXABLE PERSON
- ISSUING TAX INVOICES
- FILING VAT RETURNS
- KEEPING RECORDS
- CERTIFICATE OF REGISTRATION WITHIN THE VAT SYSTEM
- CORRECTING PAST ERRORS
- Penalties
- APPLYING FOR THE ISSUE OF RULINGS (INTERPRETATIVE DECISIONS)
- CONTACTING US
The following is an overview of the most important tax obligations stipulated by law and by-laws. A tax invoice can be issued in the form of a commercial document, if this document contains all the requirements for issuing a tax invoice, as determined by bylaw 51. Submission of false documents with the purpose of avoiding the payment of the VAT due or reducing its value.
Failure to submit a VAT return on time 5%-25% of the VAT on which a return should have been filed. In the event of late payment of VAT, 5% of the VAT due for each month or part thereof. Public: in that case the Authority will publish details of the ruling, but without reference to private data relating to the individual taxpayer, or.
Common Questions and Answers
- How is VAT applied in cases where a non-resident service provider contracts directly with a KSA customer to provide services?
- How is the “Place of Supply” determined?
- A KSA service provider supplies professional services to customers outside of the GCC. Is this subject to VAT?
- How are transactions between companies of the same corporate group treated? Does this treatment change in case of companies being located in different countries?
- Are cross charges between legal entities within a corporate group for costs incurred subject to VAT?
- If a lawyer or other professional service provider incurs out-of-pocket expenses on a client’s account, does it charge VAT when it makes a charge to the client?
For services provided over a fixed period (continuous services), VAT is due on the earlier of the invoice date or the date of payment. However, intercompany transactions between companies that form part of the same VAT group in Saudi Arabia are not subject to VAT. The VAT treatment of transactions with companies in countries outside the CSA will depend on individual factors, including the place of supply of the transaction.
No VAT applies if the legal entities are part of the same VAT group. This depends on whether the costs are incurred directly in the client's name (and charged as a 'fee'), or in the name of the lawyer himself. If the costs are incurred in the name of the client and the criteria in Chapter 7 of this guideline are met, the costs can be charged directly without additional VAT.
