56 days left to VAT implementation

The General Authority of Zakat and Tax (GAZT) clarifies that while most goods and services are subject to the standard 5% value-added tax (VAT) rate, some either fall under the zero-rated, the exempt, or are outside of the VAT scope altogether.

According to the VAT implementing regulations which were declared by the GAZT Board of Directors, a 5% VAT will be collected on all goods and services subject to the standard rate at each stage of the supply chain up to the end user. Furthermore the implementing regulations specifies select goods and services which will be exempt, zero-rated or out of scope.

GAZT clarified that the zero-rated goods and services include the supply of certain medications and medical equipment specified by the Ministry of Health and Saudi Food and Drug Authority, supply of gold, silver and platinum that is for investment purposes – at least 99% pure - and tradeable in the international bar market. Other zero-rated goods and services include any exports destined outside the GCC region, services supplied to non-GCC residents, international transport services of goods and people and supply of qualified international transport vehicles and related services such as supply of spare parts, maintenance, repair and modifications of transport vehicles.

As for exempted goods and services, these include certain financial services which include but are not limited to the issue, transfer or receipt of, or any dealing with money or any security, the provision of any credit or credit guarantee and life insurance or reinsurance of life insurance contracts. Also exempted is rental of residential real estate, which is defined as a permanent dwelling designed for human occupation.

Any activity exercised by a government body in its capacity as a public authority – such as issuance and renewal of passports and driving licences - shall not be considered to be an economic activity and as such, falls outside the VAT scope and will not be subject to VAT.

GAZT confirms that the nature of the economic activity is what ultimately determines whether the exchange of goods and services that occurs falls under the VAT scope. It also calls upon all businesses to thoroughly read and understand the implementing regulations available on the dedicated VAT website – vat.gov.sa - to ensure their readiness and compliance with VAT knowing that there is only 56 days left till VAT launch date in January 1st, 2018.

The dedicated VAT website also features a wide range of resources that support businesses’ VAT-readiness, including tools, information and tutorial guides, in addition to a list of Goods and services subject to VAT.