Sign up for tax alert emails    GTNU homepage    Tax newsroom    Email document    Print document    Download document

July 25, 2019
2019-5928

Saudi Arabia amends VAT regulations

Executive summary

On 18 July 2019, amendments to the Kingdom of Saudi Arabia (Saudi Arabia) Value Added Tax (VAT) Implementing Regulations (the Regulations) were published in the Official Gazette. The amendments are effective from the date of publication.

Detailed discussion

The amendments have both technical and administrative implications with respect to Saudi Arabia’s VAT rules and cover the core areas outlined below.

Services provided to non-GCC residents (“exported service” provisions)

Previously, the Article set out the conditions that must be met for an exported service to be treated as zero-rated. The revised Article now sets out instances where the zero-rated VAT does not apply to an exported service.

The amended article removes the previous broad conditions relating to no “benefit” being enjoyed within the Gulf Cooperation Council (GCC), and replaces them with a condition that the customer (or any other person) must not “directly” enjoy services in the GCC where that other person is not eligible for full input tax recovery on the supply.

This presents an opportunity for businesses providing services to nonresidents to review the application of these rules to its supplies, to ensure that the correct treatment is being applied and that VAT is not being charged to nonresident customers unnecessarily.

Requirements to provide the GAZT with a financial security (e.g., guarantee)

There are revised procedures regarding the submission of financial guarantees to the General Authority of Zakat and Tax (GAZT). In particular, nonresident taxable persons without a tax representative for Saudi Arabia VAT purposes will be required to submit a guarantee for an amount determined by the GAZT.

Storage of VAT-related records for nonresident taxpayers

Under this amendment, nonresident taxable persons who do not appoint a tax representative are required to appoint a third-party for the storage and maintenance of their VAT-related records in Saudi Arabia.

Refund of tax to designated persons (e.g., qualifying government bodies)

This amendment relieves certain designated persons (e.g., foreign governments and international organizations) from the restrictions that apply in relation to the refund of VAT incurred on purchases for which the associated input VAT is blocked under Article 50 of the Regulations.

The GAZT may request additional evidence to support input tax claims submitted by designated persons. In this instance the GAZT will provide at least 20 days to submit additional evidence requested, which may include invoices, records, and other information in electronic or physical form.

Tax representative, tax agents and appointed persons

The amendment means that the appointment of a local tax representative by a nonresident taxable person is now optional, however as noted under section 2, the amendments introduce a requirement for nonresident taxable persons to submit a financial or a bank guarantee for the purposes of VAT registration in Saudi Arabia where no representative is appointed.

The requirement for Saudi Arabian resident taxable persons to notify the GAZT of the appointment of a tax agent has been removed.

Transitional provisions and application of intra-GCC rules

This amendment specifies that a GCC country implementing VAT will not be treated as a Member State for VAT purposes, unless such GCC country implements an electronic services system.

Implications

Many of the amendments are expected to have a significant impact on the Saudi Arabian VAT regime, especially with respect to the activities of nonresident taxable businesses and businesses providing services to nonresident customers. Businesses should review the amendments to determine the impact on their business.

For additional information with respect to this Alert, please contact the following:

Ernst & Young and Co (Certified Public Accountants), Riyadh
  • Asim Sheikh, Saudi Arabia Tax Leader | asim.sheikh@sa.ey.com
  • Altaf Sarangi | altaf.sarangi@sa.ey.com
  • Filip Van Driessche | filip.vandriessche@sa.ey.com
  • Mohammed Bilal Akram | mohammedbilal.akram@sa.ey.com
  • George Campbell | george.campbell@sa.ey.com
  • Ajay Garg | ajay.garg@kw.ey.com
Ernst & Young and Co (Certified Public Accountants), Al-Khobar
  • Sanjeev Fernandez, Saudi Arabia VAT Leader | sanjeev.fernandez@sa.ey.com
  • Stefan Majerowski | stefan.majerowski@bh.ey.com
Ernst & Young and Co (Certified Public Accountants), Jeddah
  • Robert Dalla Costa | robert.c.costa@ae.ey.com
  • Danny Vu | danny.vu@sa.ey.com
Ernst & Young LLP (United States), Middle East Tax Desk, New York
  • Asmaa Ali | asmaa.ali1@ey.com

ATTACHMENT

 
 

The information contained herein is general in nature and is not intended, and should not be construed, as legal, accounting or tax advice or opinion provided by Ernst & Young LLP to the reader. The reader also is cautioned that this material may not be applicable to, or suitable for, the reader's specific circumstances or needs, and may require consideration of non-tax and other tax factors if any action is to be contemplated. The reader should contact his or her Ernst & Young LLP or other tax professional prior to taking any action based upon this information. Ernst & Young LLP assumes no obligation to inform the reader of any changes in tax laws or other factors that could affect the information contained herein.

 

Copyright © 2024, Ernst & Young LLP.

 

All rights reserved. No part of this document may be reproduced, retransmitted or otherwise redistributed in any form or by any means, electronic or mechanical, including by photocopying, facsimile transmission, recording, rekeying, or using any information storage and retrieval system, without written permission from Ernst & Young LLP.

 

Any U.S. tax advice contained herein was not intended or written to be used, and cannot be used, by the recipient for the purpose of avoiding penalties that may be imposed under the Internal Revenue Code or applicable state or local tax law provisions.

 

"EY" refers to the global organisation, and may refer to one or more, of the member firms of Ernst & Young Global Limited, each of which is a separate legal entity. Ernst & Young Global Limited, a UK company limited by guarantee, does not provide services to clients.

 

Privacy  |  Cookies  |  BCR  |  Legal  |  Global Code of Conduct Opt out of all email from EY Global Limited.

 


Cookie Settings

This site uses cookies to provide you with a personalized browsing experience and allows us to understand more about you. More information on the cookies we use can be found here. By clicking 'Yes, I accept' you agree and consent to our use of cookies. More information on what these cookies are and how we use them, including how you can manage them, is outlined in our Privacy Notice. Please note that your decision to decline the use of cookies is limited to this site only, and not in relation to other EY sites or ey.com. Please refer to the privacy notice/policy on these sites for more information.


Yes, I accept         Find out more