Saudi Arabia VAT, GST, and Sales Tax Guide

Saudi Arabia

Riyadh GMT +3

EY

Levels 6 and 14

Al Faisaliah Office Tower

King Fahad Road, Olaya P.O. Box 2732

11461 Riyadh

Indirect tax contacts

Sanjeev Fernandez +966 (11) 273-470 sanjeev.fernandez@sa.ey.com

Mohammed Bilal Akram +966 (11) 215-9858 mohammedbilal.akram@sa.ey.com

Tina Hsieh +971 (47) 015-802 tina.hsieh@ae.ey.com

Al Khobar GMT +3

EY

Levels 8 and 15

Adeer Tower

Prince Turkey Street, Al Yarmouk P.O. Box 3795

Al Khobar 31952

Indirect tax contactS

Sanjeev Fernandez +966 (11) 273-470 sanjeev.fernandez@sa.ey.com

Jack Sims +973 (35) 646-498 (resident in Manama, Bahrain) jack.sims@bh.ey.com

Jeddah GMT +3

EY

P.O. Box 1994

13th Floor, King’s Road Tower

King Abdulaziz Road

Al Shatea District Jeddah 21441

Indirect tax contact

Mohsin Rehmani

A. At a glance

Name of the tax

Local name

+966 (12) 286-9823 mohsin.rehmani@sa.ey.com

Value-added tax (VAT)

Value-added tax (VAT)

Date introduced 1 January 2018

Trading bloc membership Gulf Cooperation Council (GCC) Greater Arab Free Trade Area (GAFTA)

Administered by Zakat, Tax and Customs Authority (ZATCA –https://zatca.gov.sa/en)

VAT rates

Standard 15% Other Zero-rated (0%) and exempt

VAT number format Numeric account number composed of 15 digits (E, 012345678912345)

VAT return periods

Thresholds

Registration

Quarterly (general rule) Monthly (if annual taxable supplies exceed SAR40 million)

Mandatory SAR375,000

Voluntary SAR187,500

Deregistration Less than SAR375,000

Recovery of VAT by non-established businesses Yes (in law but no administrative procedures released as of yet)

B. Scope of the tax

VAT applies to the following transactions:

• The supply of goods and services made in Saudi Arabia by a taxable person

• The acquisition of goods or services received in Saudi Arabia by a taxable person

• Reverse-charge services received by a taxable person in Saudi Arabia

• Taxable imports of goods received by a taxable person in Saudi Arabia

In some cases, supplies may be outside the scope of VAT, e.g., when supplies are:

• Made by a nontaxable person

• Made outside Saudi Arabia (but note special place-of-supply rules for certain international services, e.g., electronically supplied services)

• Not made in the course of an economic activity

In other cases, supplies not usually in the scope of VAT are deemed to be taxable supplies such as supplies for nil consideration, subject to certain exclusions.

Real estate transaction tax. The real estate transaction tax (RETT) is effective in Saudi Arabia from 4 October 2020. RETT is charged at 5%, based on the total value of the real estate disposed, regardless of its condition, shape or use at the time of disposal.

RETT shall be levied based on the agreed value between the contracting parties, provided that the agreed value is not less than the fair market value on the date of disposal. RETT of 5% applies regardless whether the recipient is a resident in the KSA or not. The seller shall be obligated to discharge the tax liability to ZATCA. However, both seller and buyer shall be jointly responsible for any tax obligations.

Certain transactions are exempted from the levy of RETT. Examples of exempted transactions from RETT include (but not limited to):

• Distribution and transfer of real estate as part of an inheritance

• Gifts of real estate free of charge to certain family members (up to second degree)

• Disposing of real estate temporarily for the purpose of using it as a guarantee for financing or credit, subject to certain conditions

• Transfer of ownership of real estate without consideration to a family endowment,or as part of a charitable activity

• Transfer of ownership of real estate for the benefit of a governmental or public legal entity and projects of public benefit

• Disposal of real estate by a government entity in its capacity as a public authority outside the framework of economic, investment or commercial activity

C. Who is liable

A “taxable person” in Saudi Arabia is a person who conducts an economic activity independently for the purpose of generating income and is registered, or required to register, for VAT in Saudi Arabia.

Every person who has a place of residence in Saudi Arabia must register for, collect and remit VAT where the total value of all taxable supplies made in Saudi Arabia in the past 12 months or expected taxable supplies in the next 12 months exceeds SAR375,000. The total value of taxable supplies includes all supplies of goods and services subject to VAT at the rate of 15% or 0%. The total value of taxable supplies also includes the following:

• Nominal supplies

• Receipt of reverse-charge supplies

• After ZATCA order announces the full implementation of VAT in the GCC and the introduction of the Electronic Services System, intra-GCC supplies made from Saudi Arabia to a VATregistered person in another GCC Member State will not be subject to Saudi Arabian VAT but will count toward the total value of taxable supplies

The value of taxable supplies does not include the following:

• Value of exempt supplies

• Supplies taking place outside the scope of VAT in Saudi Arabia

• Revenue from the sale of capital assets

In cases where the tax authority has evidence or reason to doubt that a taxable person will not pay the VAT n an accurate and timely manner, it may require that a cash security or a bank guar antee is provided as a precondition for VAT registration, subject to several requirements.

Imports into Saudi Arabia by a taxable person or nontaxable person are subject to VAT, with the actual payment of VAT required to be made to customs at the point of import. Authorization may be granted to registered taxable persons to make the payment of VAT through its tax return as opposed to at customs. Despite there being a customs union in the GCC, in cases where a resident nontaxable person in Saudi Arabia imports goods with a value exceeding SAR10,000 into Saudi Arabia from another GCC Member State, and cannot prove at the time of such entry that VAT was paid on the purchase of those goods in such GCC Member State, that person is deemed to make an import of those goods and VAT shall be payable on such imports.

Goods or services that a taxable business supplies to itself are not taxable (with the exception of nominal supplies, i.e., deemed supplies). This includes instances where one member of a VAT group provides services to another member of that group.

Exemption from registration. A taxable person who at any time has annual supplies made in Saudi Arabia that exceed the mandatory registration threshold, but which are exclusively zero-rated supplies, is excluded from the requirement to register. They may, however, elect to register vol untarily. Exempt supplies do not count toward voluntary or mandatory registration thresholds.

Voluntary registration and small businesses. A person who has a place of residence in Saudi Arabia who is not obligated to register for VAT (as per the rules outlined above), may apply for VAT registration if its total value of taxable supplies in the past 12 months or expected taxable

sales in the next 12 months are between SAR187,500 and SAR375,000. A person can also reg ister voluntarily if their expenses in the past, or next 12 months, equal or exceed SAR187,500.

Group registration. Two or more legal persons may apply for VAT registration as a VAT group if all of the following conditions are met:

• Each group member must perform an economic activity and be legal resident in Saudi Arabia

• 50% or more of the capital of each legal person, or ownership or control of 50%, or more of the voting rights or value, in both or all of the group members, is held by the same person or group of persons, whether directly or indirectly (i.e., under common control)

• At least one of the group members must independently meet the taxable sales threshold for VAT registration

All members of a VAT group in Saudi Arabia are jointly and severally liable for VAT debts and penalties.

An application to form a VAT group must be made by a taxable person. This person will be the representative member of the VAT group and will have the primary obligation to comply with the obligations and the rights of the group on behalf of all members of the group, without prejudice to the joint liability of the other members of the group.

The VAT group registration takes effect from the first day of the month following the month in which the application is approved or such later date as determined by the tax authority. If the application is approved, the tax authority will issue a new VAT identification number to the VAT group representative on behalf of the VAT group and suspend the existing VAT identification numbers of members who are individually registered for VAT.

The tax authority may issue a notice to two or more taxable persons who are not part of any VAT group, but who are eligible to form one together, that they are considered to be in a VAT group from any prospective date. Such notice may only be issued where the VAT registration of each taxable person results or will result in the accrual of a VAT advantage. There is no minimum time period required for the duration of a VAT group. Changes to the VAT group (e.g., addition or deletion of members) may be done as and when necessary.

Non-established businesses. Every taxable person who does not have a place of residence in Saudi Arabia and is not registered with the Saudi Arabia tax authority, but is obligated to pay VAT on supplies made or received by that person in Saudi Arabia, must apply to the tax authority for registration within 30 days of the first supply on which that person was obligated to pay VAT. All nonresident taxable persons have the option to appoint a local, approved tax representative who is jointly and severally liable for the VAT the business owes. However, where a tax representative has not been appointed, nonresident taxable persons are required to submit a financial or a bank guarantee for the purposes of VAT registration in Saudi Arabia.

Tax representatives. The tax authority may approve persons who wish to act as tax representatives or tax agents for taxable persons in respect of their VAT obligations in Saudi Arabia. The tax authority has published a list of approved tax representatives and approved tax agents on its website.

All nonresident taxable persons have an option to appoint a tax representative resident in Saudi Arabia to represent them in all VAT related matters. That representative, once approved by the tax authority, can submit VAT returns, and settle payments, to the tax authority and correspond with the tax authority on the taxable person’s behalf. The tax representative shall be jointly liable for the payment of any VAT due by the taxable person, until such date that the tax representative is confirmed by the tax authority as ceasing to act on behalf of that taxable person. In the instance a tax representative is not appointed, the nonresident taxable person is mandatorily required to

appoint a third party, established in Saudi Arabia, to comply with the requirements of keeping invoices, bills, documents, books and records as prescribed in the VAT legislative provisions.

The requirement for resident taxable persons to notify ZATCA of the appointment of a tax agent no longer applies.

Reverse charge. The reverse-charge mechanism must be applied when a VAT-registered business imports a taxable service from a nonresident. The taxable person registered for VAT in Saudi Arabia is required to account for VAT on the transaction using the reverse-charge mechanism.

A VAT-registered recipient resident in Saudi Arabia must self-account for the VAT through its VAT return, by way of the reverse-charge mechanism, by assessing and accounting for the VAT charged on the supplies received, if:

• The place of supply for the goods or services is in Saudi Arabia.

• The supplier is not resident in Saudi Arabia.

Domestic reverse charge. There are no domestic reverse charges in Saudi Arabia.

Digital economy. Supply of wired and wireless telecommunications services and electronic ser vices have special place of supply rules in Saudi Arabia. In cases where wired and wireless telecommunications services and electronic services are provided at a telephone box, a telephone kiosk, a Wi-Fi hot spot, an internet café, a restaurant, a hotel lobby or in other cases where the physical presence of the customer at a particular location is needed for those services to be pro vided, the customer consumes and enjoys the services at that location.

In all other cases, the customer consumes and enjoys the service at the place where their usual place of residence is.

Special rules apply to determine the place of supply of electronic services. Primarily, VAT applies in the country in which the services are actually used or benefited from. Practical factors that are useful in determining where the electronic services are used are as follows:

• If the service is provided in a specific location – the place of supply is where the customer must be physically present (in a specific location) to receive the service

• If the service is not provided in a specific location – e.g., if due to the portability of the electronic service, it can be accessible from multiple locations, the customer’s usual place of resi dence is deemed the place of actual use

In determining the customer’s usual place of residence, the following information may be relied upon by the supplier:

• The invoicing address of the customer

• The bank account details of the customer

• The internet protocol address used by the customer to receive the electronic services

• The country code of the SIM card used by the customer to receive the electronic services

Nonresident providers of electronically supplied services for business-to-business (B2B) sup plies are not required to register and account for VAT in Saudi Arabia. The customer is required to self-account for the VAT via the reverse-charge mechanism. See the Reverse-charge subsection above.

Nonresident providers of electronically supplied services for business-to-consumer (B2C) sup plies are required to register and account for VAT in Saudi Arabia.

There are no other specific e-commerce rules for imported goods in Saudi Arabia.

Online marketplaces and platforms. There are special rules for taxable persons liable to VAT where electronically supplied services are supplied in Saudi Arabia through an online interface or portal acting as intermediary for a non-established business.

In cases where electronically supplied services are supplied in Saudi Arabia through an online interface or portal acting as intermediary for a non-established business, the operator of the interface or portal is presumed to purchase the services from the non-established business and to supply those same services in their own name. This does not apply in cases where both of the following conditions apply:

• The non-established business is expressly indicated as the supplier during the online sales process, in the contractual arrangements between the parties and on the invoice or receipt issued by the operator of the interface or portal

• The operator of the interface or portal does not authorize charging the customer for the delivery of the services or the delivery itself or set the general terms and conditions of the supply

In cases where both the conditions are present, the intermediary is not considered as acting in its own name as a principal, hence, the non-established business is liable to pay and account for VAT on electronic services supplied.

Registration procedures. Where the person has a requirement to register, they must apply to the tax authority to register within 30 days of the end of that month. The registration will take effect from the start of the next month following the month in which the registration application is submitted or from the start of the first month in which its annual supplies were expected to exceed the threshold.

Businesses can register for VAT using the application portal that is accessible on the ZATCA’s website. To register for VAT, taxable persons need to have a valid tax identification number (TIN). If the business does not have a TIN, it is required to register for one on the ZATCA’s website prior to VAT registration. To register, the eligible person must provide the following, at the minimum:

• Taxable person details (e.g., legal name, address, contact number)

• Financial details – projected and actual taxable sales for the next and last year, respectively; and projected and actual taxable expenses for the next and last year, respectively

The VAT registration can be submitted through the tax authority portal or through electronic mail.

The tax authority has developed an online portal, which is available on its website, where taxable persons can verify suppliers’ and customers’ VAT registration numbers.

Deregistration. Where a taxable person ceases to carry on an economic activity, including cases where a legal person ceases to exist as a legal person, that taxable person shall deregister. Deregistration will take effect from the date determined by the Saudi Arabia tax authority after its approval of the deregistration.

Where at the end of any month, a nonresident taxable person has not made any taxable supplies in Saudi Arabia in the most recent 12-month period, the taxable person must deregister.

At the end of any month, a resident taxable person (having been registered for at least 12 months) is required to deregister where all of the following occur:

• The total value of annual supplies or annual expenses in the last 12 months is less than the voluntary registration threshold

• The total value of annual supplies made in Saudi Arabia or annual expenses in the last 24 months does not exceed the mandatory registration threshold

• The total value of annual supplies or annual expenses in that month and the subsequent 11 months is not anticipated to exceed the voluntary registration threshold

A taxable person shall apply for deregistration to the Saudi Arabia tax authority within 30 days of any of the cases above. Where the taxable person does not apply for deregistration to the tax authority, the tax authority may deregister that person. In such a case, the tax authority will issue a notification.

Deregistration is optional if:

• A business’s taxable supplies in the last 12 months are between SAR187,500 and SAR375,000

• A business’s expected taxable supplies in the next 12 months (current month included) are between SAR187,500 and SAR375,000

The deregistration takes effect on the date determined by the tax authority after its approval of the deregistration. A taxable person may not apply to deregister voluntarily in cases where it has been registered for less than 12 months. The tax authority may refuse an application for deregis tration where it does not have sufficient evidence that a taxable person is eligible to deregister.

Changes to VAT registration details. Where any of the taxable person’s information changes from that provided in the application or otherwise currently recorded, that person is required to notify the tax authority of the change within 20 days of that change taking place. The mode of notifica tion is not specified, but it is presumed to be electronically through the online portal.

D. Rates

The term “taxable supplies” refers to supplies of goods and services that are liable to a rate of VAT, including the zero-rate.

The VAT rates are:

• Standard rate: 15%

• Zero-rate: 0%

The standard rate of VAT applies to all supplies of goods or services unless a specific measure provides for a reduced rate, the zero-rate or an exemption.

The standard rate of VAT at 15% increased from 5% to 15% with effect from 1 July 2020. As a transitional measure, the previous rate of 5% could have been applied for goods or services sup plied on or after 1 July 2020 in any of the following cases:

• If the supply is under a contract or agreement entered prior to 11 May 2020 and the recipient of the supply under such contract can recover the VAT in full or is a government entity – until the contract renewal, expiry or 30 June 2021, whichever is earlier

• If a tax invoice was already issued prior to 11 May 2020 for supplies to be made on or after 1 July 2020 – to the extent of the supplies covered in the invoice and performed or completed on or before 30 June 2021

The following imports of goods, which are not subject to customs duties, are exempt from import VAT:

• Goods for diplomatic and military use that are exempt from customs duties

• Imports of personal effects and household appliances being moved into Saudi Arabia that are exempt from customs duties in accordance with the Unified Customs Law

• Imports of returned goods that are fully exempt from customs duties

• Low value imports of personal items and gifts carried in travelers’ personal luggage, within the limits set by the Customs Department for relief from customs duties collection

Examples of goods and services taxable at 0%

Saudi Arabia will treat intra-GCC products in the same way as non-GCC imports for the pur poses of VAT, until the full integration of the Electronic Services System. This means that the concept of the implementing states is currently not live and that supplies to GCC residents are treated in the same way as supplies to non-GCC residents.

• A direct export from Saudi Arabia to a place outside of the GCC territory

• Services provided to non-GCC residents

• International transportation: within international transport, zero-rated goods and services include:

— International transport of passengers and goods

— Vehicles and equipment to be used for international transportation

— Certain goods and services provided in connection with international transportation

• Medicines and medical goods considered as qualifying medicines and qualifying medical goods as per the classification issued by the Ministry of Health or any other competent authority from time to time; qualifying medicines and medical goods will be part of the Ministry of Health’s formulary drug list

• Investment metals: two types of transactions involving qualifying investment metals (gold, silver and platinum of 99% purity or higher) are zero-rated:

• A producer or refiner’s original sale of investment metal

• Any further sale of gold, silver and platinum where the purity level remains

The term “exempt supplies” refers to supplies of goods and services that are not liable to VAT and that do not qualify for input tax deduction.

Examples of exempt supplies of goods and services

• Certain financial and insurance services: this does not include instances where consideration payable is by way of explicit fees.

• Real estate: due to the introduction of the real estate transaction tax (RETT) from 4 October 2020 onward (see the Real estate transaction tax subsection above, under Section B. Scope of the tax for further details), certain transactions such as the supply by way of sale, lease, license or rental of a real estate property (except for the lease of commercial property) are now exempt from VAT. The supply of hotel accommodation, non-hotel but serviced accommodation or residential property held out for rent in a similar manner to hotel or serviced accommodation will not qualify for exemption. Any lease of commercial property or property designated or used for commercial purposes will also not qualify for exemption.

Option to tax for exempt supplies. The option to tax exempt supplies is not available in Saudi Arabia.

E. Time of supply

The general time of supply rules for goods and services is the earlier of:

• Date of issuing a tax invoice

• When the goods or services are supplied

• When any payment is received to the extent of the payment

Deposits and prepayments. A deposit for a supply designed to be paid by the customer as an advance payment that will be considered as an initial payment for the supply or subsequent pay ments will create a tax point when received.

The tax point for an advance payment is whichever of the following happens first:

• The date the VAT invoice is issued for the advance payment

• The date the advance payment is received

VAT is due on the advance payment in the VAT return for the period when the tax point occurs.

A security deposit is not treated as a consideration for a supply unless the deposit is applied, either in part or full, as consideration for a supply, or it is forfeited in relation to defaulting the performance of the obligation. Apart from security deposits, a prepayment or deposit intended by the payer and recipient to eventually form part of the consideration for an identifiable supply creates a tax point when received.

Continuous supplies of services. In cases where goods or services are supplied and the invoice or agreement between the supplier and customer states that consideration is due and payable in periodical installments, a separate supply in respect of each installment takes place on the earlier of the due date for the payment of that installment or the date of actual payment.

In all other cases where supplies of goods or services are made on a continuing basis, a separate supply takes place on the earlier of the date an invoice is issued, or payment is made in respect of those goods or services, to the extent of the amount invoiced or paid.

In the event that no payment has been received or invoice has been issued in relation to a con tinuous supply of goods or services by a taxable person, the supply is deemed to take place on the date falling 12 months after the later of:

• The date on which the supply of goods or services commences

• The previous date on which the supply took place by reason of an invoice being issued or pay ment being made

Goods sent on approval for sale or return. There are no special time of supply rules in Saudi Arabia for supplies of goods sent on approval for sale or return. As such, the general time of supply rules apply (as outlined above).

Reverse-charge services. There are no special time of supply rules in Saudi Arabia for supplies of reverse-charge services. As such, the general time of supply rules apply (as outlined above).

Leased assets. There are no special time of supply rules in Saudi Arabia for supplies of leased assets. As such, the general time of supply rules apply (as outlined above).

Imported goods. A taxable person may apply for authorization for the payment of VAT on imports to be made through that taxable person’s VAT return, instead of being collected by the Customs Department on importation entry (effectively postponed import VAT accounting). The tax author ity will primarily approve larger volume importers for this option.

Supply of oil, gas, water or electricity through a distribution network. The supply of oil, gas, water or electricity through a distribution network that is not made on a continuing basis, takes place at the earlier of:

• The date an invoice is issued by the supplier in respect of those goods

• The date that payment is received by the supplier in respect of those goods

Deemed supply on deregistration. A deemed supply made as a result of the cessation of a taxable person’s economic activity takes place on the date of deregistration of that taxable person.

Supply to government entity. With effect from 1 November 2021, where a supply of goods and services is made to a government entity in accordance with contracts concluded under the Government Tenders and Procurement Law, the time of supply is the earlier of the issuance of payment order to the supplier or the date the consideration (or part thereof) is received.

F. Recovery of VAT by taxable persons

A taxable person may deduct input tax charged on goods and services supplied to it, to the extent these are received in the course of carrying on an economic activity and constitute:

• Taxable supplies, including zero-rated supplies

• Internal supplies, including input tax paid on imports from other GCC Member States; note that if the supplier resides in a GCC Member State that has not implemented VAT, the import VAT will be treated as if it came from outside the GCC

• Taxable imports from outside the GCC, meaning that VAT paid on taxable imports from outside the GCC is deductible if it used to supply zero-rated or standard-rated goods or services

A valid VAT invoice or customs document is required for an input tax deduction.

The time limit for a taxable person to reclaim input tax in Saudi Arabia is five years, following the end of the calendar year in which the taxable supply takes place.

A taxable person may claim a refund of the amount of excess VAT paid, in any of the following circumstances:

• Upon filing a VAT return for a tax period where net tax is an amount due to the taxable person

• Where the taxable person has paid an amount in excess of the amount of VAT paid

• Where the taxable person has a VAT credit balance

In all of these cases, the standard practice is to carry forward the amount in the VAT account, unless the taxable person requests a refund.

Nondeductible input tax. Input tax may not be recovered on purchases of goods and services that are not used in the course of carrying on the taxable person’s economic activity.

Examples of items for which input tax is nondeductible

• Any form of entertainment, sporting or cultural services

• Catering services in hotels, restaurants and similar venues

• The purchase or lease of “restricted motor vehicles,” related services and fuel used in restricted motor vehicles; this also includes the repair, alteration, maintenance or similar services on restricted motor vehicles

• Any other goods and services used for a private or nonbusiness purpose

Examples of items for which input tax is deductible (if related to a taxable business use)

• Goods and services used in making taxable supplies (e.g., raw materials for use in construction of a dwelling for sale)

• Goods and services used in making out-of-scope supplies, where those supplies would have been taxable if made in Saudi Arabia

Partial exemption. Input tax directly related to the making of exempt supplies is not recoverable. Where input tax incurred is attributable to both taxable and exempt supplies, only the amount attributable to taxable supplies (in accordance with the partial exemption calculation) can be recovered. The default method of proportional deduction of input tax is calculated on the basis of a fraction where:

• The numerator is the value of taxable supplies made by the taxable person in the last calendar year

• The denominator is the total value of taxable supplies and exempt supplies made by the taxable person during the last calendar year

• The value of taxable supplies or exempt supplies made by the taxable person in the fraction, include those supplies that do not take place in Saudi Arabia, but that would have been either taxable or exempt supplies if they had taken place in Saudi Arabia

The fraction outlined above, shall not include:

• Supplies of capital assets by the taxable person

• Supplies taking place outside of Saudi Arabia that are supplied from an establishment of the taxable person outside of Saudi Arabia

At the end of the calendar year, the taxable person using the default method must compare the values used in the fraction during that year with the actual values of supplies made in that calen dar year and make an adjustment to input tax in the final VAT return for that calendar year to reflect the correct proportional deduction based on the actual supplies for the entire year.

Special methods are allowed in Saudi Arabia. A taxable person may submit an application to use an alternative proportional deduction method to the default method in cases where that alternative method more accurately reflects the use of goods and services supplied to that taxable per son. In cases where the application is approved, the tax authority shall prescribe a time period during which the alternative method may or must be used. Such period may be for a maximum of five years, following which a new application must be submitted.

Approval from the tax authorities is not required to use the partial exemption standard method in Saudi Arabia.

In cases where the taxable person incurs input tax on goods and services that are not used to make taxable supplies, but are used for the following:

• In respect of raising capital for an ongoing economic activity to the extent this constitutes the making of taxable supplies by way of the issues of share capital or debt

• For a business activity that is treated as outside the scope of VAT, such as a transfer of an eco nomic activity, or part of an economic activity as a going concern

• For another one-off event that is incidental to the economic activity to the extent this constitutes the making of taxable supplies

Such input tax shall be deductible in accordance with the proportion of the overall economic activity of the taxable person that constitutes the making of taxable supplies, determined using the applicable proportional deduction method.

Capital goods. If capital assets are bought after registering for VAT, then the full amount of input tax can be deducted immediately, in case the full amount is paid up front, and the intended use of the capital asset is the making of zero-rated or standard-rated supplies. However, if the price is paid in installments, VAT is accounted for with the periodic payments in line with the time of supply rules.

In cases where capital assets have already been bought before registration and VAT has been paid on it, the input tax paid can still be deducted after registration with its value capped by the net book value. Net book value is determined in accordance with the accounting standard of the taxable person, such as straight-line depreciation. This is covered in more detail in the Preregistration costs subsection below.

A taxable person shall adjust previously deducted input tax in relation to a capital asset in cases where the taxable person’s input tax decreases or increases as a result of a change in the way the taxable person uses the asset or a change in the VAT status of such use.

The adjustment period is 6 years in respect of moveable tangible or intangible capital assets and 10 years in respect of immovable capital assets that are permanently attached to land or real estate, starting from the date of purchase of the capital asset by the taxable person. Should the life of the capital assets (determined in accordance with the accounting practice of the taxable person) be less than the otherwise corresponding adjustment period, the adjustment period shall instead be the life of the capital asset, with any part years counting as one year.

At the time a taxable person acquires a capital asset, input tax shall initially be deducted in accordance with the intended use of the goods. During the adjustment period, an adjustment to the deduction must be made following any year in which the actual use of the capital asset differs from that initial intended use. Capital expenditure incurred on a capital asset already owned by the taxable person (i.e., to construct, enhance or improve it) counts as expenditure or additional expenditure acquiring it; the adjustment period (or additional adjustment period) for such expen diture shall commence on the date of completion of such works.

At the end of each 12-month period, a taxable person shall calculate the amount of input tax potentially subject to adjustment using the fraction: initial input tax deduction divided by the adjustment period and shall make an adjustment to the amount of the input tax deducted, based on the actual use of the capital asset during that year.

The taxable person shall make an adjustment to the input tax in the tax return for the last tax period that falls in the 12-month period. Under the law, the 12-month period starts from the date of acquisition of each asset.

In cases where there is a permanent change in the use of a capital asset due to the sale or dis posal of the capital asset by a taxable person, the taxable person must adjust the input tax deduc tion for the remainder of the adjustment period for the capital asset in the tax period in which it is sold. No adjustment to the input tax deducted for the remainder of the adjustment period is needed if the capital asset is destroyed or stolen or ends its useful life earlier than accounted for.

Refunds. When a taxable person submits its VAT return, it can request to receive any refund associated with that return as a tax credit. In that case, the tax authority will automatically apply the refundable amount to the taxable person’s balance on its next VAT return or at any other time.

Input tax can be deducted in the tax period when the supply is invoiced, in line with the invoice accounting practices. If the business is approved for cash accounting, then the input tax can only be deducted in the tax period when the invoice is actually paid.

However, a taxable person may submit a request to the tax authority for refund in any circum stances outlined above, at the time the VAT return is filed or at any other time within five years following the end of the calendar year for which the circumstances relate.

Pre-registration costs. A taxable person is entitled to deduct input tax incurred by it in respect of services supplied to it during the period of six months before the effective date of registration, provided that:

• The services are purchases to be used for supplies outlined above

• The services have not been supplied onward or used in full by the taxable person prior to the registration date

• The services are not of a type that is restricted from deduction

A taxable person is entitled to deduct input tax incurred by it in respect of goods supplied to it or goods imported by it before the effective date of registration, provided that:

• The goods are purchased or imported to be used for supplies outlined in the Recovery of VAT by taxable persons subsection, and where VAT cannot be wholly attributed to such use, an appor tionment is used

• In cases where the goods are capital assets, these have a positive book value at the date of registration

• The goods have not been supplied onwards by the taxable person or used in full by the taxable person prior to the registration date

• The goods are not of a type that is restricted from deduction

Bad debts. In cases where a taxable person does not receive all or part of the consideration for a taxable supply made by them, the taxable person may reduce their output tax for the VAT amount calculated on the consideration not paid in the VAT return in which all of the following conditions are met:

• The taxable person has previously included VAT calculated on the taxable supply as output tax on a VAT return and made payment of the VAT due

• The consideration is in respect of a supply of goods or services made to a customer who is not a related person

• A period of at least 12 months has passed from the date of the taxable supply

• The taxable person holds a certificate from their certified accountant indicating that the unpaid consideration has been written off in their books

• In cases where the total amounts unpaid by the customer exceeds SAR100,000, formal legal procedures have been taken to collect the debts without success and the taxable person can provide evidence of these procedures, such as the issuance of a judicial ruling, evidence of the debtor’s bankruptcy or a court order indicating any other formal recovery procedure

A taxable person using the cash accounting basis cannot make any adjustment for nonpayment, as outlined above.

Noneconomic activities. Input tax may not be recovered on purchases of goods and services that are not used in the course of carrying on the taxable person’s economic activity.

The tax authority may allow designated persons not carrying on an economic activity, or those engaged in designated economic activity, to apply for a refund of VAT paid by them on supplies of goods or services received in Saudi Arabia. The Minister of Finance may issue an order setting out a list of persons considered an eligible person. Foreign governments, international organiza tions, diplomatic and consular bodies, and missions may also be authorized by the Minister of Finance as an eligible person to request the refund of VAT incurred on goods and services in Saudi Arabia.

G. Recovery of VAT by non-established businesses

At the time of preparing this chapter, the refund mechanisms outlined below are either not yet avail able or operative.

GCC businesses. Persons who are registered for VAT in another GCC Member State may submit an application for refund of VAT incurred in Saudi Arabia in accordance with the mechanism agreed between the GCC Member States.

Non-GCC businesses. Persons who carry on an economic activity in a country outside of the GCC territory may apply to be considered as an eligible person and able to request a refund of VAT incurred on supplies of goods or services made to that person in Saudi Arabia. A person will be considered as an eligible person in the following cases:

• If the person is established in a country with a transaction tax system similar to VAT, and that person is registered for that tax in that country

• If the person is established in a country with a transaction tax system similar to VAT and that country allows a similar mechanism to provide refunds of tax to residents of Saudi Arabia who are charged tax in that country

The person wishing to request a refund of VAT shall submit an application to the tax authority to be an eligible person. Notwithstanding that applications for VAT refunds relating to a calendar year are to be made within six months from the end of that year, the tax authorities have, at the time of writing, not provided any administrative details on the scheme’s operations.

Refund of VAT to tourists. The tax authority may authorize one or more providers to carry out a tourist refund scheme facilitating refunds of VAT incurred in Saudi Arabia by tourists. The tax authority shall publish a list of all authorized providers.

Tourists who can prove they are not resident in another GCC Member State, may apply directly to the approved provider for a refund of VAT on goods that are purchased in Saudi Arabia, which will not be used while in Saudi Arabia and that will be exported to a place outside of the GCC territory.

A refund application must be submitted by the tourist to the authorized provider while the tourist is still present in Saudi Arabia.

The authorized provider shall collect evidence of payment of VAT and on the eligibility of goods for refund. It shall also carry out a check of the application before submitting the applications to the tax authority for approval.

In cases where an application in respect of any tourist is approved, the tax authority will make payment of the refund amount to the provider. The provider is obliged to make payment to the tourist but may deduct a percentage of the VAT refund as a commission.

H. Invoicing

VAT invoices. Taxable persons must produce invoices documentation revenue and tax information on all taxable sales. Effective from 4 December 2021, each resident taxable person must issue or arrange for the issuance of an electronic tax invoice (e-invoice) through compliant electronic solutions in respect of either of the following events:

• Any taxable supply of goods or services that it has made to another taxable person or to a nontaxable legal person

• Any payment made in respect of a supply of goods or services to a taxable person or nontaxable legal person before that supply takes place

Any such e-invoice must be issued at the latest the 15th day of the month following the month in which the supply took place.

Credit notes. A VAT credit note may be used to reduce the amount of VAT charged on a supply. Alternatively, if both parties agree, the customer can issue a VAT debit note. A valid debit note places the same legal obligations on both parties as a valid VAT credit note and must fulfill the same conditions. A credit or debit note issued must contain a reference to the sequential number of the VAT invoice issued in respect of the initial supply to which the credit or debit note relates. Such credit or debit note shall include the information required to be shown on a VAT invoice. Taxable persons are required to issue credit notes (and debit notes) in a structured electronic format through electronic means.

Electronic invoicing. Electronic invoicing is allowed in Saudi Arabia, but not yet mandatory for all taxable persons.

However, mandatory electronic invoicing is being rolled out in two phases in Saudi Arabia. For the first phase, effective from 4 December 2021, all resident taxable persons (excluding nonestablished businesses) and any other parties issuing tax invoices subject to VAT on behalf of suppliers will be required to generate and store tax invoices and debit/credit notes through com pliant electronic solutions.

For the second phase, which will be effective on 1 January 2023, persons subject to e-invoicing must integrate their systems with the tax authority’s e-invoicing platform. The second phase is likely to be rolled out in waves, wherein ZATCA will notify taxable persons of the integration procedures at least six months in advance before the date set for integration with the targeted taxable person group or groups.

Generation of e-invoices must include all fields in accordance with VAT regulations in addition to the VAT number of the customer, if the customer is a registered VAT taxable person. There are separate sets of requirements mandated, from an e-invoicing perspective, for tax invoices and simplified tax invoices. For further details, see the Simplified VAT invoices subsection below.

Simplified VAT invoices. A simplified VAT invoice is required to be issued by a taxable person for taxable supplies of goods or services made to anyone other than another taxable person, a nontax able legal person, an individual institution or to any other entity established in Saudi Arabia in accordance with the applicable regulations. Further, a simplified VAT invoice may be issued for a supply of goods or services valued at less than SAR1,000. A simplified VAT invoice may not be issued in respect of an internal supply or an export of goods.

A simplified VAT invoice must include the following details:

• The date the invoice is being issued

• The full name, address and tax identification number of the supplier

• The description of the goods or service supplied

• The total consideration payable for the goods or services

• The VAT payable or a statement that the consideration is inclusive of VAT in respect of the supply of the goods or services

In addition, a summary VAT invoice can be used covering all supplies of goods and services for a given month where this is to one customer. The monthly summary VAT invoice must meet all the requirements of a normal tax invoice. It may include more than one separate supply of goods or services, provided all supplies included on a summary VAT invoice are made by the same supplier and within the same tax period.

From 4 December 2021, taxable persons are required to issue simplified VAT invoices in a struc tured electronic format through a compliant electronic solution that will include a mandatory QR code. The QR code must indicate at a minimum the seller’s name, VAT registration number of the seller, time stamp of the invoice, the VAT amount and the total invoice amount.

Self-billing. A self-billed VAT invoice may be issued by the customer on behalf of a supplier in respect of a taxable supply made to the customer, provided that a prior agreement between the supplier and the customer has been made to this effect. Such agreement must confirm a proce dure for the acceptance of each invoice by the supplier of the goods or services and include an undertaking by the supplier not to issue VAT invoices in respect of those supplies. In practice, ZATCA requires businesses to register self-billing arrangements with the authority prior to implementing them in practice.

Proof of exports. VAT is charged at the zero-rate on supplies of exported goods or intra-GCC supplies of goods. However, to qualify as VAT-free, export and intra-GCC supplies must be sup ported by evidence that the goods have left Saudi Arabia. Acceptable proof includes the follow ing documentation:

• For exports, export documentation issued by the Customs Department or equivalent Department of another GCC Member State, showing the goods being formally cleared for export on behalf of the supplier or customer of that supply, commercial documentation identifying the customer and the place of delivery of the goods, transportation documentation evidencing the delivery to or receipt of goods outside of the GCC territory

• For intra-GCC supplies, commercial documentation identifying the customer and the place of delivery of the goods, transportation documentation evidencing the delivery or receipt of goods in the GCC Member State of destination and a customs declaration if applicable

Foreign currency invoices. Invoices should always base monetary sums in the domestic currency, which is the Saudi riyal (SAR). If the transactions occurred in another currency, the taxable person should use the daily conversion rate on the date the tax becomes due provided by the Saudi Arabian Monetary Authority (SAMA) in order to convert the sum to SAR.

Supplies to nontaxable persons. In the tax authority’s invoicing guideline, it allows the issuance of a simplified tax invoice for supplies made to any person who is a nontaxable natural person (individual). The tax authority accepts that suppliers of consumer goods and services may pre sume that transactions with individuals in a retail environment are made to a nontaxable natural person, unless the supplier has reason to believe its customer is a taxable person or a legal person.

Records. Taxable persons are required to maintain their VAT records inside Saudi Arabia. The fol lowing is a non-exhaustive list of the documents the tax authority will expect taxable persons to maintain:

• All tax invoices issued and received

• Books and accounting documents

• Contracts or agreements for large sales and purchases or relevant correspondence detailing the particulars of those supplies

• Bank statements and other financial records

• Import, export and shipment documents

• Other records relating to the calculation of VAT and preparation of VAT returns

Record retention period. The invoices, books, records and accounting documents required to be maintained by a taxable person, shall be kept for a minimum of six years from the end of the tax period to which they relate, in case of audit.

Records with respect to capital assets must be kept for a minimum of the adjustment period for these capital assets – 6 years for tangible and intangible assets and 10 years for immovable assets like real estate – plus an additional 5 years from the date of purchase. In total that is 11 to 15 years.

Electronic archiving. Taxable persons are required to maintain their VAT records inside Saudi Arabia. The records must either be physical documents inside Saudi Arabia or stored electroni cally, where the physical server is also inside Saudi Arabia. This also applies to nonresident taxable persons, in whose case their designated tax representative is responsible for records maintenance according to these principles. Multinational companies that centralize their record keeping outside Saudi Arabia, must have a terminal inside Saudi Arabia where their Saudi Arabian-related VAT records are accessible.

Other relevant requirements for keeping records electronically for VAT purposes include:

• Original supporting documents for all entries in accounting books shall be kept locally

• The taxable person shall document computer data entry and processing system of accounting entries for reference, if necessary

• The taxable person shall have necessary security measures and adequate controls that can be reviewed and examined to prevent tampering

The tax authority may review electronically the systems and programs applied by the taxable person to prepare its computerized accounts.

I. Returns and payment

Periodic returns. The VAT return of a taxable person must be filed by the taxable person or a person authorized to act on its behalf for each tax period with the tax authority, no later than the last day in the month following the end of the tax period to which the VAT return relates. This deadline applies whether such date is a working day or a nonworking day. A VAT return filed validly on behalf of a taxable person shall be considered that taxable person’s self-assessment of VAT due for that tax period.

For taxable persons whose annual value of taxable supplies exceeds SAR40 million during the previous 12 months or is expected to exceed in the following 12 months, the tax period shall be monthly. For all other taxable persons, the standard tax period shall be three months. If a taxable person’s annual value of taxable supplies does not exceed this value, they may submit an applica tion to use a monthly tax period.

A taxable person who has used the monthly tax period for two years may submit an application to use a tax period of 3 months, provided that taxable person’s value of annual taxable supplies during the last 12 months does not exceed the SAR40 million value.

The tax authority may with a reasoned decision, obligate a taxable person to change their tax period.

Periodic payments. Payment of VAT due by a taxable person in respect of a tax period must be made at the latest by the last day of the month following the end of that tax period. The person making the payment must provide details of the tax identification number of the taxable person and the tax period or tax periods to which the period relates.

Businesses must pay the tax authority the VAT they owe via a bank transfer to the tax authority’s designated account using the SADAD payment system.

The net VAT payable by a taxable person in respect of a tax period is calculated by deducting the total input tax (including input tax on imports) allowed to the taxable person during the tax period from the total amount of output tax payable in respect of all taxable supplies made by the taxable person in Saudi Arabia during the tax period. This calculation method is known as the invoice accounting basis.

When the tax authority receives a payment from a taxable person, it will first be applied to the balance of the tax period to which the payment refers. Any excess balance will be applied to penalties, fines or charges owing from any previous tax period, and the remainder will then be applied to outstanding balances for other tax periods, starting from the oldest period with a bal ance payable.

The tax authority may offset any VAT credit balance against any other taxes due by the taxable person. The tax authority shall notify the taxable person where an offset of a credit balance is carried out.

If a VAT return is in a refund position, the balance can be carried forward and set off against a future payment or a refund can be requested. For VAT returns in a net refund, this option is to be selected at the time of submitting the VAT return.

Where any relevant VAT amount is expressed in a currency other than SAR, the amount must be converted to SAR using the daily rate prescribed by the Saudi Arabian Monetary Authority on the date that the relevant VAT amount becomes due.

Electronic filing. Electronic filing is mandatory in Saudi Arabia for all taxable persons. Taxable persons have to login to the ZATCA portal (https://zatca.gov.sa/en) and submit the VAT return electronically. Supporting documents can be uploaded and amendments can be filed through the portal. Option for paper filing is not available in Saudi Arabia.

Payments on account. Payments on account are not required in Saudi Arabia.

Special schemes. Secondhand goods. A taxable person may apply to account for VAT payable on a supply of eligible used goods, using the profit margin method. The taxable person may not use this method until it has received notification from ZATCA that it is approved. A supply of eligible used goods must meet all of the following criteria:

• The supply is that of used goods situated in Saudi Arabia, and the goods are of a type that ZATCA has specified are eligible for VAT to be calculated using the profit margin method.

• The goods were purchases by the taxable person in a supply made to the taxable person in Saudi Arabia by a nontaxable person, by a taxable person outside of their economic activity, or by a supplier applying the profit margin method in all cases where such a taxable person did not deduct any input tax on their purchase of the goods.

• The taxable person meets the criteria in respect of the purchase and supply of such eligible used goods.

A supply of goods that are situated outside of Saudi Arabia, or that move to or from Saudi Arabia as part of the supply to, or supply by, the taxable person is not a supply of eligible used goods.

VAT invoices issued for supplies of eligible used goods by a taxable person must clearly refer to the taxable person’s use of the profit margin method and must not show any amount of VAT charged in respect of any supply.

In cases where a taxable person purchases the eligible used goods from a nontaxable person, the taxable person must issue an invoice in respect of the purchase to that nontaxable person. This invoice must include:

• The name, address and tax identification number of the taxable person

• The name and address of the nontaxable person

• The date of the purchase

• Details of the goods purchases, including any relevant registration number or other details that ZATCA may specify

• The consideration payable in respect of the purchase of the goods

The profit on a supply of eligible used goods is calculated as the consideration for the supply of the eligible used goods by the taxable person, less the consideration payable in respect of the purchase of the eligible used goods. The profit does not include any expenses or other amounts incurred by the taxable person in respect of the supply. In cases where the profit calculated of any supply is zero, or results in a negative amount, the value of that supply by the taxable person is zero.

A taxable person must not deduct input tax in respect of any amount of VAT charged to it or included in the consideration for the purchase of eligible used goods. At the time of preparing this chapter, details on what would qualify as “eligible used goods” have yet to be made available.

Cash accounting. As an exception to the requirement to use the invoice accounting basis, a tax able person may apply to calculate net VAT due for a tax period on a cash accounting basis provided that the annual value of taxable supplies in the past calendar year does not exceed SAR5 million, and the anticipated value of taxable supplies in the current calendar year is not expected to exceed SAR5 million.

However, a taxable person who has received notification of a VAT violation in the last 12 months is not eligible to use the cash accounting basis.

A taxable person using the cash accounting basis shall only include output tax and input tax in their VAT return in respect of supplies of goods and services for which and to the extent that payment has been made.

Annual returns. Annual returns are not required in Saudi Arabia.

Supplementary filings. No supplementary filings are required in Saudi Arabia.

Correcting errors in previous returns. In cases where the taxable person becomes aware of an error on incorrect amount in a filed tax return or becomes aware of such facts that should have led it to be aware of such error or incorrect amount, which has resulted to the amount of tax payable to the tax authority being understated, that person must notify the tax authority within 20 days of becoming aware of the error or incorrect amount by filing a submission to correct the relevant tax return. If the understatement of the net tax is less than SAR5,000, the taxable person may correct that error by adjusting the net tax in its next tax return.

In cases where the taxable person becomes aware of an error or an incorrect amount in a filed tax return that has resulted in the amount of tax payable to the tax authority being overstated, the taxable person may correct that error at any time by adjusting the tax in any tax return in a later date of discovering the error. Further, no correction to any tax return relating to an overstatement of tax in respect of a tax period may be made after a period of five years has passed from the end of the calendar year in which the tax period takes place.

Corrections of tax returns are to be made online through the ZATCA portal (https://zatca.gov.sa/ en).

Digital tax administration. There are no transactional reporting requirements in Saudi Arabia.

J. Penalties

Penalties for late registration. Any taxable person who has not applied for VAT registration within the set time frame, shall be fined SAR10,000.

Penalties for late payment and filings. If a taxable person recognizes an error in a VAT return that it has already submitted, it has 20 days to notify the tax authority of the error by submitting a correction form. If the error results in a discrepancy of VAT owed under SAR5,000, the correc tion can be made by adjusting the net VAT in the business’s next VAT return. Any taxable person who carries out the following:

• Files an incorrect VAT return to the Saudi Arabia tax authority

• Amends a VAT returns after filing or files any document with the tax authority due by them that results in an error in the calculation of the VAT amount resulting in an amount that is less than the VAT due, shall be liable to a fine equal to 50% of the value of the difference between the calculated VAT and the VAT due; the tax authority has the power to remove or reduce the penalty set out above

Any taxable person that fails to submit a VAT return within the set time frame, shall be liable to a fine of not less than 5% and not more than 25% of the value of the VAT that they would have had to declare.

Any taxable person who fails to pay the VAT due during the set time frame shall be liable to a fine equal to 5% of the value of the unpaid VAT for each month or part thereof for which the VAT has not been paid.

An assessment issued by the tax authority in cases where a taxable person has failed to file a VAT return can be withdrawn after the filing of a completed VAT return for that tax period by the taxable person or a person authorized to act on its behalf.

The Saudi Arabia tax authority may make a VAT assessment of a taxable person irrespective of a VAT return filed by the taxable person. The tax authority may make a new VAT assessment to amend a previous assessment made by it. The tax authority must notify the taxable person of a VAT assessment.

The tax authority may not issue or amend an assessment in respect of any tax period after a period of five years has passed from the end of the calendar year in which the tax period falls.

In cases where any transaction is being carried out with the intention of breaching the provisions of the VAT law and regulations, or in cases where a person is required to register but fails to do so, the tax authority may issue or amend assessments up to a period of 20 years from the end of the calendar year in which the tax period falls.

Penalties for errors. In cases where a taxable person becomes aware of an error or an incorrect amount in a filed VAT return or becomes aware of such facts that should have led it to be aware of such an error or incorrect amount, which has resulted in the amount of VAT payable to the tax authority being understated, that person must notify the tax authority within 20 days of becoming aware of the error or incorrect amount by filing a submission to correct the VAT return.

In cases where a taxable person becomes aware of an error or an incorrect amount in a filed VAT return that has resulted in the amount of VAT payable to the tax authority being overstated, the taxable person may correct that error at any time by adjusting the VAT in any tax return in a later date of discovering the error.

Subject to the above, if the understatement of net VAT by the taxable person is less than SAR5,000, the taxable person may correct that error by adjusting the net VAT in its next VAT return.

No correction to any VAT return relating to an overstatement of VAT in respect of a tax period may be made after a period of five years has passed from the end of the calendar year in which the tax period takes place.

A non-registered taxable person shall be liable to a fine not exceeding SAR100,000 for issuing a VAT invoice without prejudice to any stricter penalty set out by any other law.

A fine not exceeding SAR50,000 shall be imposed on any taxable person that:

• Has not kept VAT invoices, books, records and accounting documents for the set time frame, and the fine shall be per tax period

• Prevents or obstructs the employees of the Saudi Arabia tax authority or anyone working for the tax authority from performing their duties

• Violates any other provision of the law or implementing regulations

If the same violation is repeated within three years from the date of issuing the final decision of a previous penalty, the fine, pursuant to that decision imposed on the violator, may be doubled.

The decision issued by the Saudi Arabia tax authority to impose a penalty, may include the pub lication of its content at the cost of the violator, in a local newspaper issued in the place of the taxable person’s residence. If there is no newspaper in their place of residence, it shall be pub lished in a local newspaper in the nearest area to them or by any other appropriate means, depending on the type of violation, its gravity and its effects, after the decision is deemed final.

Penalties for fraud. Tax evasion shall be punishable by a fine of not less than the amount of VAT due and not more than three times the value of the goods or services that are the subject of the evasion. For example, this could be where a taxable person submits false documents to evade the payment of the VAT due or to reduce its value, or where a taxable person moves goods in or out of Saudi Arabia without paying the VAT due.

Where a supplier charges and collects VAT from customers, without the supplier being VAT registered, they shall be fined up to SAR100,000.

Personal liability for company officers. There are no provisions in the VAT legislation to assign a personal penalty or fine on the directors of the taxable person. As such, in practice company officers cannot be held personally liable for errors and omissions in VAT declarations and reporting in Saudi Arabia.

Statute of limitations. The statute of limitations in Saudi Araba is five years. Generally, ZATCA may not issue or amend an assessment in respect of any tax period after a period of five years from the end of the calendar year in which the tax period falls. However, in case a taxable person has an intent to breach the VAT provisions, ZATCA may issue or amend assessments up to a period of 20 years from the end of the calendar year in which the tax period falls.