Introduction
The GCC nations have announced the introduction of VAT from the next year and preparation for the same is in full swing. Kingdom of Saudi Arabia (KSA) already published the draft VAT law on the website of General Authority of Zakat and Tax (GAZT). It is considered to one of the major steps towards implementation of VAT in the country from 1st January 2018.
The GAZT have invited stakeholders and the public to give their feedback on the draft law by 29th June 2017. The draft regulation does not disclose much of details regarding specific VAT requirements as the same are to be issued through separate implanting regulation which is expected to be issued post Ramadan. This article shall highlight major details about the draft VAT law.
Where and How?
All the GCC nations are bound to introduce the VAT by 2018 for the treaty signed by them. KSA is introducing VAT from 1st January 2018.
VAT is an indirect tax and accordingly the burden of payment will be on the end consumer. The business registered in the KSA will be required to register themselves with the authorities for collection of VAT if their turnover exceeds the specified limit which is SAR 375,000. The registered business can also avail the VAT credit on the VAT paid by them and get the benefit of input credit on the VAT invoices issued by them.
The draft law gives extensive powers to the GAZT including obtaining taxpayers’ information, seek details and description of transaction if it suspects any form of tax avoidance and holding two or more persons jointly liable for obligations and payments for VAT law.
Broad Coverage of the Draft Law
The law leaves many provisions to be issued later through implementing regulations and silent on the time frame for issuing the same. The registration requirements for VAT are dealt with in Article 4, 5 and 6 which shall be applicable from the date of its publication in the official gazette of the kingdom.
The law is divided into 12 chapters where chapter 1 deals with important definitions while chapter 2 focus on imposition of tax. Chapter 3 provides the provisions related to taxable persons and rules for registration and deregistration for VAT leaving most details to the implementing regulations. Chapter 4, 5 and 6 is dedicated to supplies and place of supply. Chapter 7 deals with the calculation of taxable value of supplies while chapter 9 provide for calculation of tax liabilities. Chapter 8 deals with provisions related to imports Chapter 10 highlights the administration and procedural part and chapter 11 deals with penalties and fines. It is important to note here that penalty of up to 50% of the tax due can be imposed on default in filing the returns and claims. Chapter 12 is general provisions including the transition and implementing regulations.
What you need to do?
If you are a business registered in the region, ensure you have proper books of accounts and financial records in place. Also, check if your turnover exceeds the specified limit and register for VAT with the regulatory authorities. The authorities are expected to open the registration in a couple of months. Also, ensure that your staff is competent enough to address the new challenges bought in by the introduction of this new law.
Please feel free to contact us at [email protected] for making your company 100% compliant with the VAT regulations in the region.
