5% VAT on money transfer fee

Money transfer charges will increase from Jan. 1 as 5% Value Added Tax (VAT) will be levied on money transfer fees, according to the General Authority of Zakat and Tax (GAZT), which is responsible for managing the implementation, administration and enforcement of VAT in Saudi Arabia in close coordination with other relevant entities.

The 5% VAT will be on the money transfer fee and not on the transfer amount, GAZT clarified, adding that VAT will be paid by the person sending money.

However, many financial services will be exempt from VAT. These include several transactions and services such as interest on loans, lending fees charged with an implicit margin such as loans and credit cards, mortgages, financial leasing, transactions involving money and securities, as well as current, deposit and savings accounts.

Other exempted services include life insurance policies.

Registered businesses conducting economic activities are subject to VAT, but registered businesses conducting VAT-exempted economic activities are not entitled to deduct VAT.

The nature of economic activities will determine whether VAT should be levied on these or not.

House rent and medicines are among some of the facilities and commodities exempted from Value Added Tax (VAT).

VAT will be implemented in the Kingdom from Jan. 1 2018.

No VAT will be levied on passport and driving license issuance and renewal fees.

No VAT will apply on exports to countries outside the Gulf Cooperation Council, services given to non-residents of GCC countries, international transport services for goods and passengers, import of spare parts of qualified means of international transport and their maintenance, repair and modifications.