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Saudi Arabia VAT: A Comprehensive Guide

December 29, 2022

The Gulf Cooperation Council (GCC) is similar to the European Union, and the Kingdom of Saudi Arabia is a member. On the basis of the shared framework law for the implementation of VAT in GCC nations, the member states have decided to introduce VAT no later than January 1, 2018.

With the advent of VAT, Saudi Arabian enterprises are required to be VAT-compliant by adhering to the Saudi Arabia VAT Law and its implementing rules. The first step toward VAT compliance is registering for VAT. This is because only registered firms may charge VAT on their goods and services and remit the tax to the government.

Being VAT-registered allows companies to not only collect VAT but also recover input VAT (VAT paid on purchases and expenses) prior to remitting the VAT payment. This comes with the extra obligation of maintaining compliance from the time transactions are recorded until periodic statements are submitted to the authorities.

In principle, all imports and exports are subject to VAT. The law on value-added tax and its accompanying rules include specific restrictions and exclusions.

All taxable supplies of goods and services produced in the Kingdom by a taxable person or received in the Kingdom by a taxable person when the reverse charge mechanism applies, as well as all imports of products, are subject to tax.

Unless otherwise specified, a taxable person's nominal supply of goods or services is considered a supply of goods or services for consideration made as part of the taxable person's economic activity.

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When to Register for VAT

 Not all enterprises operating in the Kingdom are required to register for Saudi VAT. The KSA VAT implementation laws establish a registration threshold for VAT. The VAT registration threshold is based on the yearly value of the business's supplies made or anticipated to be made. Depending on the threshold, VAT registrations are categorized as follows:

Mandatory Registration

All enterprises with taxable sales above 375,000 SAR in the preceding twelve months (or estimated taxable sales in the future twelve months) are required to register, collect tax, and submit VAT reports. In 2018, firms with taxable sales above 1,000,000 SAR over the last twelve months (or estimated taxable sales over the next twelve months) must register, collect tax, and submit VAT reports.

Non-resident enterprises are required to register for VAT regardless of the registration threshold as soon as they make a taxable supply for which they are required to charge VAT. A non-resident must select a GAZT-approved tax representative established in Saudi Arabia.

Optional Registration

All firms with a place of business in the KSA whose taxable supply value exceeded SAR 187,500 but did not exceed SAR 375,000 in the previous 12 months or expect that it will exceed in the next 12 months are permitted to register for VAT. A firm may seek voluntary registration not only on the basis of the supplies it provides (outward supplies), but also if the yearly worth of its expenses and purchases is more than the threshold amount.

Here, business registration is optional and only necessary if the company chooses to register. However, being registered under Saudi VAT gives considerable advantages for enterprises since it permits input tax deductions.

Exemption 

Businesses whose annual supply value in the United Kingdom exceeds the necessary registration level but whose activities are limited to zero-rated deliveries are exempt from the VAT registration obligation. However, they may register willingly if they so desire.

Registration for Non-Residents

Non-KSA residents who make taxable sales inside the kingdom are obliged to register and submit VAT returns. This may be accomplished by designating a tax agent headquartered in Saudi Arabia. On behalf of the non-resident taxpayer, this GAZT-approved tax agent files VAT returns and makes payments. Both the tax agent and the taxpayer will be held responsible for any underpaid VAT.

Group Registration

Two or more legal entities may register for VAT as a group under KSA VAT, utilizing the GAZT's electronic application form.

To be qualified for group registration:

  • All of the group's legal entities should be controlled, or at least 50% owned, by the same person or persons.

  • Everyone in the group must engage in economic activities.

  • All group members must be lawful Saudi residents.

  • At least one member of the organization must fulfill the minimum requirements for VAT registration. 

When Must Taxpayers Submit Their VAT Returns?

The deadline for filing the VAT return depends on the yearly sales volume.

When yearly sales are less than 40 million SAR, the taxpayer is required to submit quarterly returns. In this instance, taxpayers must submit VAT returns four times every year. The first filing period runs from January through March, with the deadline falling at the end of April. The second filing period runs from April through June, with a July 31st deadline. The third filing period runs from July through September, and the deadline is towards the end of October. The final filing period runs from October through December, and the deadline is January 31st.

When annual sales exceed 40 million SAR, the taxpayer is required to submit a monthly VAT return. The first filing period will begin on January 1, with the deadline falling on February 28. The second filing period will begin on February 1, and the filing date will be March 31, and so on. The taxpayer must submit tax returns a total of 12 times.

The taxpayer may seek an extension if the VAT payment cannot be made on time. The GAZT must receive this request. The request for an extension must address the cause for the extension, the tax obligation, and the tax period for which the tax is due. The requested response was delivered within three weeks. Your request may either be denied or granted.

How Do You Submit VAT Returns?

You must join the GAZT e-portal in order to submit your VAT returns. The VAT return form has two sections: VAT on sales and VAT on purchases. You will not be permitted to enter figures in some areas of the VAT return form because they are automatically computed based on the input values you provided, such as total sales and total purchases.

Following the submission of the VAT return for the tax period, a person must make a VAT payment. The deadline for paying taxes is the last day of the month after the conclusion of the tax period. Therefore, the VAT payment deadline for a person submitting monthly reports is the last day of the month after the reporting month. The VAT payment deadline for a person submitting quarterly returns is the last day of the month following the reporting quarter.

Businesses and individuals registered in KSA are required to keep their transaction-related records, bills, and invoices for at least six years following the end of the tax period in which the transaction happened. The records should be physically or digitally preserved inside the nation. This regulation also applies to taxpayers who are non-residents.

How to Register for Saudi Arabia VAT

Saudi Arabia's VAT Registration is a five-step process:

  1. Apply for a Taxpayer Identification Number (TIN).

  2. Login to the GAZT portal.

  3. Select VAT Registration

  4. Provide the information and documentation required to complete the VAT registration.

  5. Declaration

What Documents Are Necessary for Registering for VAT?

On the registration form, you will be required to provide the following three essential details:

  • Identifying information about the company

  • business address, including email contact information.

  • Financial Details

  • Financial Representative

However, depending on the kind of taxpayer a company owner belongs to, he or she will be needed to present the GAZT-mandated paperwork. 

KSA VAT Deregistrations

When taxable supplies stop or fall below the yearly VAT registration level, VAT deregistrations may be necessary.

Do You Need a Saudi Arabian Tax Representative?

Non-resident taxpayers may use a tax agent or register themselves directly. Non-residents must select a tax agent who has been authorized by the tax authorities. Tax agents are jointly and severally liable for their clients' VAT obligations.

Contact us for a free consultation if you need help registering for Saudi Arabia VAT or if you are unsure whether you are required to register.

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