Following the issue of the final VAT law on 28 July 2017, the Kingdom of Saudi Arabia has published its final VAT implementing regulations.

As KSA has now issued the full VAT legislation, which comprises the law and the regulations, businesses have the complete set of information necessary in order to analyse the VAT implications for their operations, people, processes, contracts and IT systems and to prepare before 1 January 2018.

The key features of the KSA VAT regulations are as follows:

• Effective date – the VAT law and executive regulations confirm that VAT will be effective from 1 January 2018.
• Scope of VAT – VAT is imposed on all taxable supplies of goods and services in KSA by a taxable person or received in KSA by a taxable person where the reverse charge mechanism applies and on imports of goods.
• Mandatory VAT registration – businesses must register by 20 December if their annual turnover exceeds the mandatory registration threshold of SAR 375,000. Businesses with turnover of less than SAR 1 million can defer registration until 31 December 2018 and businesses that make exclusively zero rated supplies may register voluntarily even if the value of the supplies exceed the mandatory registration threshold. GAZT had already started registering large businesses automatically based on existing records. Businesses that are eligible to register and have not received any notification from GAZT that they have been automatically registered may register online.
• Voluntary VAT registration – an option to register will be available for businesses where the annual taxable supply is below the mandatory registration threshold but exceeds the voluntary registration threshold of SAR 187,500.
• Group Registration – related companies may apply for VAT group registration subject to certain conditions.
• Zero rated supplies – export of goods, services supplied to customers outside the GCC, international and intra-GCC transportation, investment grade precious metals, medicine and medical equipment.
• Exempt supplies – leases of residential real estate, life insurance and margin-based financial services.
• Compliance – Businesses with taxable supplies exceeding SAR 40 million will be required to submit VAT returns on a monthly basis and all other persons will be required to file returns on a quarterly basis. The VAT return and payment will be due within a month from the end of the tax period.
• Transitional rules – there are various transitional provisions including a provision that deals with contracts entered into before 30 May 2017 that are silent on VAT.

With less than 4 months left until VAT is implemented in KSA, Al Tamimi will be happy to undertake a VAT impact assessment to help you understand the impact of VAT on your business and to enable you to comply with your VAT obligations.

If you have any questions on the above or require any assistance with VAT implementation, please do not hesitate to contact us.

Shiraz Khan, Senior Tax Advisor, Al Tamimi & Company

Ahmed Ibrahim, Partner & Head of Equity Markets, Al Tamimi & Company

Grahame Nelson, Partner, Head of Office – Riyadh