The Kingdom of Saudi Arabia or KSA announced its final Value Added Tax (VAT) law in July 2017. Saudi Arabia’s General Authority of Zakat and Tax (GAZT) has opened the VAT registration in Saudi Arabia starting from September 2017. There is an electronic registration process and there is a specific website for VAT purposes. All businesses that have annual revenue of above SAR 375,000 (USD 100,000) were mandated to register by December 20, 2017. Let’s see some of the main highlights.

• According to Article 2, all imports of goods and services coming into the KSA are subject to VAT.

• Per Article 53, the VAT is effective from 1 January 2018.
• The standard VAT rate is 5 percent. However, there are some specific goods and services that come under zero rate or are exempted from the VAT.
• As per Article 53, all individuals who are to be registered for VAT purposes should first register themselves with the General Authority for Zakat and Tax (GAZT) and that too within 30 days from the date when the law was issued, that is, 30 days from July 28, 2017.
• The enterprises or company’s which fail to register within the time limit or specific period have to pay a fine of SAR 10,000.
• As per Article 21, the VAT will be due if an invoice was raised or payment was made before the registration date but the actual date of supply of goods or services was after the implementation or registration date.

Who is eligible to register for VAT?

All companies, enterprises or entities that have annual taxable revenue of over SAR 375,000 (USD 100,000) have to compulsorily register.

However, all taxable individuals whose taxable supplies are over the mandatory registration limit but not SAR 1,000,000 (USD 266,667), would be exempted from registering for a year.

Buy it is compulsory to register for all taxable individuals whose annual taxable supplies are more than SAR 1,000,000 (USD 266,667).

Businesses or enterprises with an annual turnover going above SAR 187,500 (USD 50,000) could voluntarily register with the GAZT. They have an advantage from recovering input VAT on the purchases they make.

Taxable persons with annual taxable supplies of less than SAR 187,500 (USD 50,000) do not have to register for VAT.

Are non-residents required to register?

Yes, even non-resident enterprises that are performing economic activities though they do not have any fixed place of business in the Kingdom are needed to register, in case they are obliged to pay VAT. All non-resident taxable individuals should hire a tax expert or representative who is working and established in Saudi Arabia and is also approved by the GAZT.

When and how often is the VAT to be reported?

Taxable individuals over an annual taxable income over SAR 40,000,000 (USD 10,666,667) are needed to file the VAT returns every month. All other taxable people need to file the VAT returns only every quarter or once in a three-month period.

In case of monthly returns for the tax period starting from 1 January 2018 to 31 January 2018, the VAT return should be definitely filed before 28 February 2018. In case of quarterly returns, where the tax period is 1 January 2018 to 31 March 2018, it is necessary to file the VAT return before 30 April 2018.

The VAT returns have to be submitted through the GAZT e-portal.

Preparations for VAT

Businesses should first prepare to meet the needs to conform to their tax obligations. They could need to make any required modifications to their operations, processes, financial management or accounting, ERP technology, etc. It is important to first understand the affects of the VAT and tune up their process model to the necessary compliance requirements. If you have any questions or doubts regarding VAT registration in Saudi Arabia, just do not worry; the expert team at IMC can help you in this transition and filing your VAT returns without any hassles.