Customer

1What is Value Added Tax (VAT), and how does it work?

Value Added Tax (or VAT) is an indirect tax imposed on all goods and services that are bought and sold by businesses, with a few exceptions. VAT is applied in more than 160 countries around the world as a reliable source of revenue for state budgets. VAT will be collected by SEC from its customers by applying 5% on its supplies e.g. electricity, connection fees. SEC will subtract - from the VAT collected - its outgoing VAT (on SEC purchases). The net amount is paid to General Authorithy for Zakat and Tax (GAZT) on monthly basis. Therefore VAT is not revenue for SEC.

2Why is VAT being introduced?

The introduction of VAT is a key part of the Kingdom's broader plan to improve fiscal sustainability and diversify government revenues. VAT will provide a stable and sustainable source of funds to support the country’s ambitious programme of transformation, including investment in economic development, diversification and public services. This will have real benefits which will positively affect the public and businesses of all sizes across Saudi Arabia.

3Will VAT cover all goods and services? At what rate will VAT be introduced?

All goods and services will be subject to VAT. The VAT rate will be set at a standard rate of 5%. Few services and goods (e.g. qualified Medicines and Medical equipments) will be zero rated. Such list will be notified by GAZT, please refer to chapter 6 of the KSA VAT law In addition, some goods and services will be exempt (e.g. rent of residential real estate, capital markets activities). Please refer to chapter 5 of the KSA VAT Law. As VAT is an indirect tax, it is not charged on salaries and wages of employees.

4When will VAT be introduced?

VAT will be introduced in Saudi Arabia on January 1st 2018.

5What is the VAT applicablity on customers? Will VAT vary based on nature of customers E.g. Residential, Commercial, Industrial, Government, etc.?

Taxation will be based on the nature of goods and services provided according to the policy stated at GCC Agreement level as well as in the Implementing Regulations. All customers will be similarly charged, irrespective of their nature, size, categories e.g. residential, commercial, industrial, government.

6Are supplies to government organizations Subject to VAT?

Yes, government supplies are subject to VAT and the businesses supplying the government are liable to pay the VAT. GAZT may (in the future) determine certain government bodies / charities / citizens / companies / farmers as exempt from paying VAT yet so far none has been designated

7Where can I access VAT Law?

VAT Law, that was published in H1438/11/. https://vat.gov.sa/sites/default/files/Value-Added-Tax-Approved-Implementing-Regulations-Bilingual.pdf

8Will imported services or goods be taxable ?

VAT is applicable on all imported goods and services at the same rates as applicable in KSA.

9How do I know if my business needs to pay VAT?

'-All companies, businesses or entities which make an annual taxable supply of goods and services in excess of SAR 375,000 are legally required to register for VAT with the General Authority for Zakat and Tax '-The registration period for companies below SAR 1M in revenues will extend until the end of 2018. '-Those which make an annual taxable supply of goods and services in excess of SAR 187,500 but less than SAR 375,000 are eligible to register voluntarily. Voluntary registration provides significant benefits for the companies since it allows the deduction of input tax. '-Businesses which are generating less than 187,500 SAR annual revenue are exempt from the need to register Businesses that provide goods and services which are not subject to VAT are not required to register for VAT.

10How will invoices have to be adjusted to include VAT? (i.e., what lines)?

The VAT Invoice must include the following details in Arabic, in addition to any other language also shown on the Tax Invoice as a translation: 1. The date of issue; 2. A sequential number which uniquely identifies the invoice; 3. The Tax Identification Number of the Supplier; 4. In cases where the Customer is required to self-account for Tax on the Supply, the customer's Tax Identification Number and a statement that the Customer must account for the Tax; 5. The legal name and the address of the Supplier and of the Customer; 6. The quantity and nature of the Goods supplied or the extent and nature of the Services rendered; 7. The date on which the supply took place, where this differs from the date of issue of the invoice; 8. The taxable amount per rate or exemption, the unit price exclusive of VAT and any discounts or rebates if they are not included in the unit prices; 9. The rate of Tax applied; 10. The Tax amount payable, shown in riyals; 11. In the case where Tax is not charged at the basic rate, a narration explaining the Tax treatment applied to the Supply; 12. In cases where the margin scheme for used Goods is applied, reference to the fact that VAT is charged on the margin on those Goods.

11Will the VAT identification number of the supplier / customer need to to be displayed on the invoice?

Tax invoices must include the Tax Identification Number of the Supplier. In cases where the Customer is required to self-account for Tax on the Supply, the tax invoice must also include the customer's Tax Identification Number and a statement that the Customer must account for the Tax. SEC will be required to mention the VAT number of its customer outisde KSA.

12Will "self-billing' be used?

Self-billed Tax Invoices may be issued by the Customer on behalf of a Supplier in respect of a Taxable Supply made to the Customer, provided that a prior agreement between the Supplier and the Customer has been made to this effect. Such agreement must confirm a procedure for the acceptance of each Invoice by the Supplier of the Goods or Services, and include an undertaking by the Supplier not to issue Tax Invoices in respect of those Supplies.

13 Currently the physical bills are not sent to customer if the bill amount is less than 100 SAR. If customers don’t receive the VAT invoice, then how can they claim back VAT?

A simplified Tax Invoice may be issued for a Supply of Goods or Services valued at less than one thousand (1,000) riyals. A simplified Tax Invoice may not be issued in respect of an Internal Supply (sales to other GCC countries) or an Export of Goods.


Vendor

1What is Value Added Tax (VAT), and how does it work?

Value Added Tax (or VAT) is an indirect tax imposed on all goods and services that are bought and sold by businesses, with a few exceptions. VAT is applied in more than 160 countries around the world as a reliable source of revenue for state budgets. VAT will be collected by SEC from its customers by applying 5% on its supplies e.g. electricity, connection fees. SEC will subtract - from the VAT collected - its outgoing VAT (on SEC purchases). The net amount is paid to General Authorithy for Zakat and Tax (GAZT) on monthly basis. Therefore VAT is not revenue for SEC.

2Why is VAT being introduced?

The introduction of VAT is a key part of the Kingdom's broader plan to improve fiscal sustainability and diversify government revenues. VAT will provide a stable and sustainable source of funds to support the country’s ambitious programme of transformation, including investment in economic development, diversification and public services. This will have real benefits which will positively affect the public and businesses of all sizes across Saudi Arabia.

3Will VAT cover all goods and services? At what rate will VAT be introduced?

All goods and services will be subject to VAT. The VAT rate will be set at a standard rate of 5%. Few services and goods (e.g. qualified Medicines and Medical equipments) will be zero rated. Such list will be notified by GAZT, please refer to chapter 6 of the KSA VAT law In addition, some goods and services will be exempt (e.g. rent of residential real estate, capital markets activities). Please refer to chapter 5 of the KSA VAT Law. As VAT is an indirect tax, it is not charged on salaries and wages of employees.

4When will VAT be introduced?

VAT will be introduced in Saudi Arabia on January 1st 2018.

5What is the VAT applicablity on customers? Will VAT vary based on nature of customers E.g. Residential, Commercial, Industrial, Government, etc.?

Taxation will be based on the nature of goods and services provided according to the policy stated at GCC Agreement level as well as in the Implementing Regulations. All customers will be similarly charged, irrespective of their nature, size, categories e.g. residential, commercial, industrial, government.

6Are supplies to government organizations Subject to VAT?

Yes, government supplies are subject to VAT and the businesses supplying the government are liable to pay the VAT. GAZT may (in the future) determine certain government bodies / charities / citizens / companies / farmers as exempt from paying VAT yet so far none has been designated

7Where can I access VAT Law?

VAT Law, that was published in H1438/11/. https://vat.gov.sa/sites/default/files/Value-Added-Tax-Approved-Implementing-Regulations-Bilingual.pdf

8Will imported services or goods be taxable ?

VAT is applicable on all imported goods and services at the same rates as applicable in KSA.

9How do I know if my business needs to pay VAT?

'-All companies, businesses or entities which make an annual taxable supply of goods and services in excess of SAR 375,000 are legally required to register for VAT with the General Authority for Zakat and Tax '-The registration period for companies below SAR 1M in revenues will extend until the end of 2018. '-Those which make an annual taxable supply of goods and services in excess of SAR 187,500 but less than SAR 375,000 are eligible to register voluntarily. Voluntary registration provides significant benefits for the companies since it allows the deduction of input tax. '-Businesses which are generating less than 187,500 SAR annual revenue are exempt from the need to register Businesses that provide goods and services which are not subject to VAT are not required to register for VAT.

10If a company has paid customs tax, is it still required to pay VAT?

Customs duty is separate from VAT. Therefore, the company will still be required to pay VAT after paying the customs duty.


11Do you apply VAT to SEC machineries / assets that are sent abroad to be repaired and are then re-imported back to Saudi Arabia?

If the good is on maintenance only, no VAT is paid at import. If the good is improved or has increased capacity, VAT might be charged on the improvement (i.e. value-added).


12How are transactions between companies of the same group treated? Does this treatment change in case of companies being located in different companies?

Intercompany transactions for a Group operating in Saudi Arabia are not subject to VAT as long as they belong to a VAT group.VAT grouping is a facilitation measure by which 2 or more bodies corporate can be treated as a single taxable person for VAT purposes. A group of companies applies to be treated as a single taxable entity for VAT purposes. The registration is made in the name of the representative member, who is responsible for completing and rendering the single return on behalf of the group. Whilst the representative member is responsible for paying the VAT or receiving any repayment due, all the companies are jointly and severally liable for any VAT debts. Supplies between group members are normally disregarded for VAT.


13Are cross charges between entities subject to VAT?

Intercompany transactions follow general VAT principles unless part of a VAT Group.

14What will the VAT be for power sold to other countries?

Taxable supplies are treated differently depending on whether they are consumed domestically, within GCC countries or outside GCC countries. Supplies to outside of GCC will be zero-rated.

15How are employee benefits treated under VAT?

Expenditures relating to the following Goods or Services are not considered to be incurred by the Taxable Person in the course of carrying on his Economic Activity, and consequently the Taxable Person will not be permitted to deduct the Input Tax relating to such expenditure, save where the Goods or Services are to be directly supplied onwards as a Taxable Supply by the Taxable Person: '-Any form of entertainment, sporting or cultural services; '-Catering services in hotels, restaurants and similar venues; '-The purchase or lease of restricted motor vehicles, '-Repair, alteration, maintenance or similar services on restricted motor vehicles; '-Fuel used in restricted motor vehicles; or '-Any other Goods and Services used for a private or non-business purpose.

16What is VAT treatment on cash advance purchases? In cash advance, the company collects advance payments from customers and deducts the customers' purchases from the cash account of each customer?

Where a supply of goods or services actually takes place after 1 January 2018, but an advance payment was received or an invoice was issued before such date, the payment is deemed to have been made or the invoice is deemed to have been issued on the actual supply date for the purposes of determining the date VAT was collected on those goods or services.

17 How does VAT apply in the case of long-term contracts?

All long term contracts of SEC will become taxable as per law once VAT comes into force in the Kingdom on Jan 1 2018.

18what are the VAT requirements in case of partial delivery / partial billing or invoicing

Reporting will be done on the basis of invoice issued by the vendor. Invoice would be issued for the amount of supply made. In practical scenario, customer will only pay for the amount of material delivered. If advance payment is made, supplier will have to issue VAT invoice for that amount.

19How will the credit / debit memos handled by SEC?

Debit or Credit note have same invoicing requirements as per Article 53 of the Regulations. They should contain same information as an invoice in addition to referece to the original invoice against which such debit/credit notes are issued.

20Is VAT applicable on refurbishment of materials / equipment?

VAT is applicable on any repairs and purchase of parts for addition to machinery

21Is there VAT on products that are bought/ sold at auctions (e.g. second/ armotized machines or cars)?

This is determined based on the nature of the sale. If the seller is conducting an economic activity, the VAT applies, i.e. if an individual sells his car then there is no VAT. If the intermediary conducting the auction is not taking ownership of goods but just charging a commission, this is then treated as a service and the commission amount is VAT applicable.

22How will existing tax treaties between countries affect the payment of VAT on imports/ exports?

The GCC Framework Agreement specifies supplies between GCC member states. All other treaties and international obligations will remain unchanged.

23Will companies that fall below the voluntary threshold need to register in order to be able to do business with larger companies?

Companies that fall below the voluntary threshold will not be eligible for VAT registration. Companies that meet the voluntary threshold and are below the mandatory threshold have the option to register for VAT. The limit of compulsory registration for taxation shall be SR 375,000 & The optional/voluntary registration limit will be 50% of the compulsory registration limit.

24If a vendor is not VAT-registered but his materials are critically required, can a company omit paying the vendor the 5% VAT from his total invoice amount?

A taxable supplier is responsible for issuing an invoice with the appropriate VAT applied. Where a supplier is not registered for VAT, they are not entitled to charge any VAT and as such the company should not pay any VAT to the supplier.

25Within GCC, will a company always have to register with the destination country?

This is not always required. GCC internal supplies can take place under reverse charge mechanism, without a need for the supplier to register.

26Will there be a grace period/ amnesty period?

The registration period for companies below 1M SAR in revenues will extend until the end of 2018. Beyond this there will be no grace periods. There is no grace period if revenue is in excess of 1M.

27Is it allowed to undertake business with companies which are not registered even though taxable revenue exceeds the mandatory threshold?

Yes. The liability to register lies with each business. Taxpayers must consider the negative VAT effects of having an unregistered business partner.

28How is the mandatory registration threshold calculated?

The mandatory registration threshold is calculated on the basis of the taxable turnover either based on the past twelve months or in the twelve months to come.

29Do we need separate VAT number for each CR?

No, a branch and its head office are considered to be one taxable person for VAT purposes, given that they both form part of the same legal entity. This also applies in case of two branches with different Commercial Registrations (CRs).

30 When will VAT registration start?

Registration has officially been launched on 28 August 2017.

31Will a new identifier for VAT be required?

Upon successful registration, the Authority will issue a registration certificate along with a separate VAT identification number.

32 For companies that are already registered for Corporate Income Tax (CIT), will there be a separate registration for VAT?

Yes, there will be a separate process for VAT registration. However, existing taxpayer information in existing databases will be leveraged to the greatest extent possible.

33What will be the requirements for VAT registration?

Any registration application must contain the following minimum information: 1.The official name of the legal person or natural person; 2.Physical address of regular abode or place of business; 3. Registered address to receive electronic mail 4.Existing electronic identification number issued by the Authority, if any; 5.Commercial Registration identification number; 5.Value of annual supplies or annual expenses; and 6. Effective date of registration, or any alternative requested effective date

33Will it be possible to Group for VAT purposes across GCC countries?

No, one of the requirements for VAT Groups is each Legal Person is resident in the Kingdom and carries out an Economic Activity.

34How will group companies be treated? Is there a maximum revenue size for the group company above which it will be treated as separate companies?

Two or more Legal Persons may apply to register as a TAX Group in the Kingdom if the following requirements are met: 1. Each Legal Person is resident in the Kingdom and carries out an Economic Activity; 2. Fifty percent (50%) or more of the capital of each legal Person, or ownership or control of fifty percent (50%) or more of the voting rights or value, in both or all of the legal Persons, is held by the same Person or group of Persons, whether, in any of the foregoing cases, directly or indirectly 3. At least one of the Legal Persons is a Taxable Person eligible to be registered in its own right.

35 In case of a Group Holding, will VAT need to be filed on a Grouping/ Holding level or seperately for each company?

Companies that are registered as a VAT group shall be treated as a single taxable person for the purposes of this Law and as such should file VAT aggregated at Group level.


36How does VAT apply in case of products that sold domestically yet in a foreign currency (e.g. USD)?

Where any amount is expressed in a currency other than riyals, the amount must be converted to riyals using the daily rate prescribed by the Saudi Arabian Monetary Authority on the date Tax becomes due.


37How will invoices have to be adjusted to include VAT? (i.e., what lines)?

The VAT Invoice must include the following details in Arabic, in addition to any other language also shown on the Tax Invoice as a translation: 1. The date of issue; 2. A sequential number which uniquely identifies the invoice; 3. The Tax Identification Number of the Supplier; 4. In cases where the Customer is required to self-account for Tax on the Supply, the customer's Tax Identification Number and a statement that the Customer must account for the Tax; 5. The legal name and the address of the Supplier and of the Customer; 6. The quantity and nature of the Goods supplied or the extent and nature of the Services rendered; 7. The date on which the supply took place, where this differs from the date of issue of the invoice; 8. The taxable amount per rate or exemption, the unit price exclusive of VAT and any discounts or rebates if they are not included in the unit prices; 9. The rate of Tax applied; 10. The Tax amount payable, shown in riyals; 11. In the case where Tax is not charged at the basic rate, a narration explaining the Tax treatment applied to the Supply; 12. In cases where the margin scheme for used Goods is applied, reference to the fact that VAT is charged on the margin on those Goods.


38How frequently will VAT need to be filed and how long after the deadline does the filing have to be received by GAZT?

The Tax Return of a Taxable Person must be filed electronically with the Authority for each Tax Period by the last day in the month following the end of the Tax Period to which the Tax Return relates. '-Taxable persons which make an annual taxable supply of goods and services in excess of SAR 40,000,000 will be required to file VAT returns monthly '-All other taxable persons will be required to file VAT returns quarterly. However, such persons may elect to file monthly returns subject to approval by GAZT Payment of Tax due by a Taxable Person in respect of a Tax Period must be made by the last day of the month following the end of that Tax Period.


39Will the VAT identification number of the supplier / customer need to to be displayed on the invoice?

Tax invoices must include the Tax Identification Number of the Supplier. In cases where the Customer is required to self-account for Tax on the Supply, the tax invoice must also include the customer's Tax Identification Number and a statement that the Customer must account for the Tax. SEC will be required to mention the VAT number of its customer outisde KSA.


40Are there differences in how invoices should be strucutured with respect to the counterparty (e.g. different invoices for small, non-registered markets than for large ones)?

There is no differentiation of VAT invoice requirements depending on the counterparty. However, a simplified Tax Invoice may be issued for Supplies of Goods or Services valued less than one thousand (1,000) riyals. A simplified Tax Invoice may not be issued in respect of an Internal Supply or an Export of Goods.


41Will "self-billing' be used?

Self-billed Tax Invoices may be issued by the Customer on behalf of a Supplier in respect of a Taxable Supply made to the Customer, provided that a prior agreement between the Supplier and the Customer has been made to this effect. Such agreement must confirm a procedure for the acceptance of each Invoice by the Supplier of the Goods or Services, and include an undertaking by the Supplier not to issue Tax Invoices in respect of those Supplies.


SEC Employees

1What is Value Added Tax (VAT), and how does it work?

Value Added Tax (or VAT) is an indirect tax imposed on all goods and services that are bought and sold by businesses, with a few exceptions. VAT is applied in more than 160 countries around the world as a reliable source of revenue for state budgets. VAT will be collected by SEC from its customers by applying 5% on its supplies e.g. electricity, connection fees. SEC will subtract - from the VAT collected - its outgoing VAT (on SEC purchases). The net amount is paid to General Authorithy for Zakat and Tax (GAZT) on monthly basis. Therefore VAT is not revenue for SEC.

2Why is VAT being introduced?

The introduction of VAT is a key part of the Kingdom's broader plan to improve fiscal sustainability and diversify government revenues. VAT will provide a stable and sustainable source of funds to support the country’s ambitious programme of transformation, including investment in economic development, diversification and public services. This will have real benefits which will positively affect the public and businesses of all sizes across Saudi Arabia.

3Will VAT cover all goods and services? At what rate will VAT be introduced?

All goods and services will be subject to VAT. The VAT rate will be set at a standard rate of 5%. Few services and goods (e.g. qualified Medicines and Medical equipments) will be zero rated. Such list will be notified by GAZT, please refer to chapter 6 of the KSA VAT law In addition, some goods and services will be exempt (e.g. rent of residential real estate, capital markets activities). Please refer to chapter 5 of the KSA VAT Law. As VAT is an indirect tax, it is not charged on salaries and wages of employees.

4When will VAT be introduced?

VAT will be introduced in Saudi Arabia on January 1st 2018.

5What is the VAT applicablity on customers? Will VAT vary based on nature of customers E.g. Residential, Commercial, Industrial, Government, etc.?

Taxation will be based on the nature of goods and services provided according to the policy stated at GCC Agreement level as well as in the Implementing Regulations. All customers will be similarly charged, irrespective of their nature, size, categories e.g. residential, commercial, industrial, government.

6Are supplies to government organizations Subject to VAT?

Yes, government supplies are subject to VAT and the businesses supplying the government are liable to pay the VAT. GAZT may (in the future) determine certain government bodies / charities / citizens / companies / farmers as exempt from paying VAT yet so far none has been designated

7Where can I access VAT Law?

VAT Law, that was published in H1438/11/. https://vat.gov.sa/sites/default/files/Value-Added-Tax-Approved-Implementing-Regulations-Bilingual.pdf

8Will imported services or goods be taxable ?

VAT is applicable on all imported goods and services at the same rates as applicable in KSA.

9How do I know if my business needs to pay VAT?

'-All companies, businesses or entities which make an annual taxable supply of goods and services in excess of SAR 375,000 are legally required to register for VAT with the General Authority for Zakat and Tax '-The registration period for companies below SAR 1M in revenues will extend until the end of 2018. '-Those which make an annual taxable supply of goods and services in excess of SAR 187,500 but less than SAR 375,000 are eligible to register voluntarily. Voluntary registration provides significant benefits for the companies since it allows the deduction of input tax. '-Businesses which are generating less than 187,500 SAR annual revenue are exempt from the need to register Businesses that provide goods and services which are not subject to VAT are not required to register for VAT.

10If a company has paid customs tax, is it still required to pay VAT?

Customs duty is separate from VAT. Therefore, the company will still be required to pay VAT after paying the customs duty.


11Do you apply VAT to SEC machineries / assets that are sent abroad to be repaired and are then re-imported back to Saudi Arabia?

If the good is on maintenance only, no VAT is paid at import. If the good is improved or has increased capacity, VAT might be charged on the improvement (i.e. value-added).


12How are transactions between companies of the same group treated? Does this treatment change in case of companies being located in different companies?

Intercompany transactions for a Group operating in Saudi Arabia are not subject to VAT as long as they belong to a VAT group.VAT grouping is a facilitation measure by which 2 or more bodies corporate can be treated as a single taxable person for VAT purposes. A group of companies applies to be treated as a single taxable entity for VAT purposes. The registration is made in the name of the representative member, who is responsible for completing and rendering the single return on behalf of the group. Whilst the representative member is responsible for paying the VAT or receiving any repayment due, all the companies are jointly and severally liable for any VAT debts. Supplies between group members are normally disregarded for VAT.


13Are cross charges between entities subject to VAT?

Intercompany transactions follow general VAT principles unless part of a VAT Group.

14What will the VAT be for power sold to other countries?

Taxable supplies are treated differently depending on whether they are consumed domestically, within GCC countries or outside GCC countries. Supplies to outside of GCC will be zero-rated.

15How are employee benefits treated under VAT?

Expenditures relating to the following Goods or Services are not considered to be incurred by the Taxable Person in the course of carrying on his Economic Activity, and consequently the Taxable Person will not be permitted to deduct the Input Tax relating to such expenditure, save where the Goods or Services are to be directly supplied onwards as a Taxable Supply by the Taxable Person: '-Any form of entertainment, sporting or cultural services; '-Catering services in hotels, restaurants and similar venues; '-The purchase or lease of restricted motor vehicles, '-Repair, alteration, maintenance or similar services on restricted motor vehicles; '-Fuel used in restricted motor vehicles; or '-Any other Goods and Services used for a private or non-business purpose.

16What is VAT treatment on cash advance purchases? In cash advance, the company collects advance payments from customers and deducts the customers' purchases from the cash account of each customer?

Where a supply of goods or services actually takes place after 1 January 2018, but an advance payment was received or an invoice was issued before such date, the payment is deemed to have been made or the invoice is deemed to have been issued on the actual supply date for the purposes of determining the date VAT was collected on those goods or services.

17 How does VAT apply in the case of long-term contracts?

All long term contracts of SEC will become taxable as per law once VAT comes into force in the Kingdom on Jan 1 2018.

18what are the VAT requirements in case of partial delivery / partial billing or invoicing

Reporting will be done on the basis of invoice issued by the vendor. Invoice would be issued for the amount of supply made. In practical scenario, customer will only pay for the amount of material delivered. If advance payment is made, supplier will have to issue VAT invoice for that amount.

19How will the credit / debit memos handled by SEC?

Debit or Credit note have same invoicing requirements as per Article 53 of the Regulations. They should contain same information as an invoice in addition to referece to the original invoice against which such debit/credit notes are issued.

20Is VAT applicable on refurbishment of materials / equipment?

VAT is applicable on any repairs and purchase of parts for addition to machinery

21Is there VAT on products that are bought/ sold at auctions (e.g. second/ armotized machines or cars)?

This is determined based on the nature of the sale. If the seller is conducting an economic activity, the VAT applies, i.e. if an individual sells his car then there is no VAT. If the intermediary conducting the auction is not taking ownership of goods but just charging a commission, this is then treated as a service and the commission amount is VAT applicable.

22How will existing tax treaties between countries affect the payment of VAT on imports/ exports?

The GCC Framework Agreement specifies supplies between GCC member states. All other treaties and international obligations will remain unchanged.

23Will companies that fall below the voluntary threshold need to register in order to be able to do business with larger companies?

Companies that fall below the voluntary threshold will not be eligible for VAT registration. Companies that meet the voluntary threshold and are below the mandatory threshold have the option to register for VAT. The limit of compulsory registration for taxation shall be SR 375,000 & The optional/voluntary registration limit will be 50% of the compulsory registration limit.

24If a vendor is not VAT-registered but his materials are critically required, can a company omit paying the vendor the 5% VAT from his total invoice amount?

A taxable supplier is responsible for issuing an invoice with the appropriate VAT applied. Where a supplier is not registered for VAT, they are not entitled to charge any VAT and as such the company should not pay any VAT to the supplier.

25Within GCC, will a company always have to register with the destination country?

This is not always required. GCC internal supplies can take place under reverse charge mechanism, without a need for the supplier to register.

26Will there be a grace period/ amnesty period?

The registration period for companies below 1M SAR in revenues will extend until the end of 2018. Beyond this there will be no grace periods. There is no grace period if revenue is in excess of 1M.

27Is it allowed to undertake business with companies which are not registered even though taxable revenue exceeds the mandatory threshold?

Yes. The liability to register lies with each business. Taxpayers must consider the negative VAT effects of having an unregistered business partner.

28How is the mandatory registration threshold calculated?

The mandatory registration threshold is calculated on the basis of the taxable turnover either based on the past twelve months or in the twelve months to come.

29Do we need separate VAT number for each CR?

No, a branch and its head office are considered to be one taxable person for VAT purposes, given that they both form part of the same legal entity. This also applies in case of two branches with different Commercial Registrations (CRs).

30 When will VAT registration start?

Registration has officially been launched on 28 August 2017.

31Will a new identifier for VAT be required?

Upon successful registration, the Authority will issue a registration certificate along with a separate VAT identification number.

32 For companies that are already registered for Corporate Income Tax (CIT), will there be a separate registration for VAT?

Yes, there will be a separate process for VAT registration. However, existing taxpayer information in existing databases will be leveraged to the greatest extent possible.

33What will be the requirements for VAT registration?

Any registration application must contain the following minimum information: 1.The official name of the legal person or natural person; 2.Physical address of regular abode or place of business; 3. Registered address to receive electronic mail 4.Existing electronic identification number issued by the Authority, if any; 5.Commercial Registration identification number; 5.Value of annual supplies or annual expenses; and 6. Effective date of registration, or any alternative requested effective date

33Will it be possible to Group for VAT purposes across GCC countries?

No, one of the requirements for VAT Groups is each Legal Person is resident in the Kingdom and carries out an Economic Activity.

34How will group companies be treated? Is there a maximum revenue size for the group company above which it will be treated as separate companies?

Two or more Legal Persons may apply to register as a TAX Group in the Kingdom if the following requirements are met: 1. Each Legal Person is resident in the Kingdom and carries out an Economic Activity; 2. Fifty percent (50%) or more of the capital of each legal Person, or ownership or control of fifty percent (50%) or more of the voting rights or value, in both or all of the legal Persons, is held by the same Person or group of Persons, whether, in any of the foregoing cases, directly or indirectly 3. At least one of the Legal Persons is a Taxable Person eligible to be registered in its own right.

35 In case of a Group Holding, will VAT need to be filed on a Grouping/ Holding level or seperately for each company?

Companies that are registered as a VAT group shall be treated as a single taxable person for the purposes of this Law and as such should file VAT aggregated at Group level.


36How is reporting done to GAZT

SEC shall submit VAT return on monthly basis. SEC will be required to report the numbers required to be filed with GAZT. SEC will access the GAZT portal and populate the VAT return form online


37Will VAT due need to be calculated on each transaction (i.e. link supplies to each specific sale) or can it be calculated on an aggregate basis?

The VAT amount due or owed is calculated by subtracting your incoming VAT (on your sales) from your outgoing VAT (on your purchases). The net amount is paid or received to/from GAZT. It is thus calculated on an aggregate basis.


38How frequently will VAT need to be filed and how long after the deadline does the filing have to be received by GAZT?

The Tax Return of a Taxable Person must be filed electronically with the Authority for each Tax Period by the last day in the month following the end of the Tax Period to which the Tax Return relates. '-Taxable persons which make an annual taxable supply of goods and services in excess of SAR 40,000,000 will be required to file VAT returns monthly '-All other taxable persons will be required to file VAT returns quarterly. However, such persons may elect to file monthly returns subject to approval by GAZT Payment of Tax due by a Taxable Person in respect of a Tax Period must be made by the last day of the month following the end of that Tax Period.


39What are the requirements/ conditions for invoice vs cash accounting?

A Taxable Person is only allowed to apply for cash-based accounting provided that the annual value of taxable supplies in the past calendar year and the anticipated value of taxable supplies in the current calendar year does not exceed five million Saudi riyals. This is intended to support small businesses with the implementation of VAT. Taxable persons with taxable supplies above that threshold will be required to report to GAZT on accrual accounting basis.


40How will GAZT validate an overstatement vs an understatement?

GAZT will utilize audit procedures and confidential methods to validate overstatements versus understatements.


41What interface/ IT system will GAZT use for VAT filing?

VAT filing will be conducted via the existing GAZT e-portal.


42What will the requirements of the companies' IT systems to link to GAZT system?

VAT registration, filings and other relevant processes will be handled via the GAZT e-portal solution. This will not require a direct linking to company systems.


43How does VAT apply in case of products that sold domestically yet in a foreign currency (e.g. USD)?

Where any amount is expressed in a currency other than riyals, the amount must be converted to riyals using the daily rate prescribed by the Saudi Arabian Monetary Authority on the date Tax becomes due.


44Will there be compensation by GAZT in case the refund takes long to process?

Once a refund is approved in full or in part, the Authority must conclude refund procedures and initiate payment within sixty (60) days from the date of approval of the request. No additional compensation will be paid with regards to GAZT refunds.


45How will invoices have to be adjusted to include VAT? (i.e., what lines)?

The VAT Invoice must include the following details in Arabic, in addition to any other language also shown on the Tax Invoice as a translation: 1. The date of issue; 2. A sequential number which uniquely identifies the invoice; 3. The Tax Identification Number of the Supplier; 4. In cases where the Customer is required to self-account for Tax on the Supply, the customer's Tax Identification Number and a statement that the Customer must account for the Tax; 5. The legal name and the address of the Supplier and of the Customer; 6. The quantity and nature of the Goods supplied or the extent and nature of the Services rendered; 7. The date on which the supply took place, where this differs from the date of issue of the invoice; 8. The taxable amount per rate or exemption, the unit price exclusive of VAT and any discounts or rebates if they are not included in the unit prices; 9. The rate of Tax applied; 10. The Tax amount payable, shown in riyals; 11. In the case where Tax is not charged at the basic rate, a narration explaining the Tax treatment applied to the Supply; 12. In cases where the margin scheme for used Goods is applied, reference to the fact that VAT is charged on the margin on those Goods.


46Will the VAT identification number of the supplier / customer need to to be displayed on the invoice?

Tax invoices must include the Tax Identification Number of the Supplier. In cases where the Customer is required to self-account for Tax on the Supply, the tax invoice must also include the customer's Tax Identification Number and a statement that the Customer must account for the Tax. SEC will be required to mention the VAT number of its customer outisde KSA.


47Are there differences in how invoices should be strucutured with respect to the counterparty (e.g. different invoices for small, non-registered markets than for large ones)?

There is no differentiation of VAT invoice requirements depending on the counterparty. However, a simplified Tax Invoice may be issued for Supplies of Goods or Services valued less than one thousand (1,000) riyals. A simplified Tax Invoice may not be issued in respect of an Internal Supply or an Export of Goods.


48Will "self-billing' be used?

Self-billed Tax Invoices may be issued by the Customer on behalf of a Supplier in respect of a Taxable Supply made to the Customer, provided that a prior agreement between the Supplier and the Customer has been made to this effect. Such agreement must confirm a procedure for the acceptance of each Invoice by the Supplier of the Goods or Services, and include an undertaking by the Supplier not to issue Tax Invoices in respect of those Supplies.


49Currently the physical bills are not sent to customer if the bill amount is less than 100 SAR. If customers don’t receive the VAT invoice, then how can they claim back VAT?

A simplified Tax Invoice may be issued for a Supply of Goods or Services valued at less than one thousand (1,000) riyals. A simplified Tax Invoice may not be issued in respect of an Internal Supply (sales to other GCC countries) or an Export of Goods.


50Will GAZT need the data / files digitally or physically?

GAZT will not require submission of any invoices or supporting documents for VAT returns. The documents need to be retained in electronic or paper form in Arabic for 6 years for auditing purposes.


51What is GAZT policy regarding online document archiving? What are GAZT categories of documents and it's prescribed archived time?

The invoices, books, records and accounting documents required to be maintained by a Person in accordance with the Agreement must be kept for a minimum period of six (6) years from the end of the Tax Period to which they relate. Records with respect to Capital Assets must be kept for a minimum of the Adjustment Period for these Capital Assets prescribed in article 50 of these Regulations, plus five (5) years, from the date those Capital Assets are acquired by the Person. Records must be kept in the Kingdom either physically or through an access to the relevant server where these records are stored. In cases where the Taxable Person opts to store the records electronically, the following conditions must be met: 1. The computer system or server must be physically located in the Kingdom. A Taxable Person who has a fixed establishment in the Kingdom may have its central computer outside of the Kingdom, provided it has with a terminal at the subsidiary in the Kingdom through which all data and entries regarding the account of the fixed establishment in the Kingdom can be accessed. 2. Data entered into the computer system must be in Arabic and must be an identical copy of said books. 3. Original supporting documents for all entries in accounting books must be kept locally 4. Final accounts and balance sheet may be generated directly by computer. In the case of using a conventional accounting method with computer assistance for some account items, all settlement entries must be provided in Arabic. 5. The Taxable Person must document computer data entry and processing system of accounting entries for reference, when needed. 6. The Taxable Person must have necessary security measures and adequate controls, which can be reviewed and examined, to prevent tampering 7. The Authority may review electronically the systems and programs applied by the Taxable Person to prepare its computerized accounts.