Saudi Arabian VAT compliance
The date of supply for taxation purposes is deemed to be the earliest of date of invoice, payment date or date of supply. Invoices should be issued at the latest by the 15th of the month following the taxable supply. In the case of periodic payment installments of the supply, a separate supply takes place on the earlier of the due date for the installment payment or payment for the installment.
Self supplies
- Goods or services provided by a taxable business to itself are considered outside of the scope of VAT
- Goods or services provided to members of a VAT Group by another member of the same group are outside the scope of VAT
Vouchers
- Vouchers for the redemption of a taxable supply are not considered a taxable event subject to the following conditions
- The face value is equal to the redemption value
Place of supply
- For B2B cross-border transactions, the supplier must obtain the tax identification number of their customer
- The place of supply for electronic and telephonic services will be based on the location of the consumption. Criertia for determining the place of consumption/residence includes:
- Invoice address
- Bank account location
- IP address of customer
- SIM card address
- Supply of live cultural, sport, education and entertainment place of supply will be the physical location of the supply
- Goods or services supplied outside of the country are exempt
- Supplies made from outside of the Kingdom to within the Kingdom are considered taxable supplies if provided with transport services
- Exports may only be exempted from VAT if the supplier obtains proof the departure of the goods from the Kingdom
Determining fair market value
- The tax authorities may re-determine the taxable value of a transaction where
- There is a supply between related parties
- Where the value is below the fair market value
- The customer is not entitled to a full input VAT deduction
- The supply is made without consideration
Cash-based VAT accounting
- Taxable businesses may apply for cash-based VAT reporting if their annual sales are below Riyals 5million
- An successful application must be adopted for a minimum of two years unless the threshold is exceeded
- Cash-based VAT accounting calculates the VAT due only on VAT paid or received
Input VAT deductions
- Tax registered businesses may deduct input VAT from the charged output VAT levied
- Input VAT incurred on services enjoyed 6 months prior to VAT registration may be used
- Input VAT suffered on goods used for the services but paid for prior to the VAT registration may be deducted. The value of capital goods will be the net book value
- Input VAT deductions on expenditure not related to the economic activity are not permitted for the following:
- Entertainment, sport or cultural events
- Hotel and restaurant catering services
- Second hand cars, including repairs and fuel
- Input VAT incurred relating to exempt supplies are now deductible
- Proportionate deductions are permitted, by prior agreement, where the input VAT relates to goods or services partially used in the supply of taxable supplies. A default calculation is available
- Input VAT may be recovered when incurred in relation to capital raising, the transfer of a going concern and other one-off events incidental to the taxable business activity
- Special rules apply to VAT deductions on capital assets apply
Reverse charge
- In certain circumstances involving non-resident suppliers, the customer will be responsible for declaring the output and input VAT
- This includes resident electronic marketplaces and portals where the operator buys from a non-resident provider an e-services for onward supply to local consumers
Supply of used goods
- Eligible used goods may be sold under the profit margin scheme, once approved by the tax authorities
- The taxable margin is calculated on the difference between the purchase price and sales price
Imports
- There is a low-value import relief of Riyals 10,000 for imports by consumers
- Imports of special needs goods are VAT exempt
- Regular importers may apply for a deferral of import VAT, and payment via their subsequent VAT return
Record keeping
- Tax payers must maintain supporting VAT accounts and records for at least 6 years
- Records must be maintained in Arabic
- Electronic records must be maintained in the Kingdom for resident companies, or have portal access to the tax authorities if outside of the territory
- A Saudi tax representative is required to maintain the invoices, books, records and accounting documents of non-resident businesses