Value Added Tax
Circular on loyalty programs and VAT implications
The Zakat, Tax and Customs Authority (‘ZATCA’) published a Circular on its official website explaining the VAT implications (along with illustrative examples) associated with various types of ‘Loyalty programs’ offered by financial institutions operating in KSA.
The Circular, issued in Arabic at the moment, also contains some important definitions such as what constitutes an eligible voucher, ineligible voucher, consideration etc, and can be accessed here.
Further information on the Circular are accessible through this link.
Circular on the VAT treatment of certain supplies in the Financial Services Industry
ZATCA published a Circular on its official website to provide guidance on the application of VAT law and its Implementing Regulations on the following transactions:
- Supply of services by KSA based financial institutions to customers located outside KSA.
- Incentives provided by international credit card issuers and payment network operators to KSA based financial institutions.
- Interchange services and associated fees.
The Circular also includes some important definitions such as interchange fee, issuer bank, acquirer bank etc in the context of interchange services which are not available in the VAT law and its Implementing Regulations.
The Circular, issued in Arabic as well as English languages, also includes illustrative examples and guidance material to facilitate the taxpayers in assessing and applying the correct VAT treatment on the aforementioned transactions.
PwC issued a detailed newsalert on this development which is accessible through this link.
Proposed criteria for used cars: Eligible goods under profit margin method for VAT purposes
ZATCA published a proposed criteria for ‘used cars’ to be classified as ‘eligible goods’ for applying profit margin method under Article 48 of the KSA VAT Implementing Regulations.
The proposed classification criteria was published on the Public Consultation Platform of the National Competitiveness Center on 4 January 2023 – for public consultation.
Further information is accessible through this link.
Circular on Real estate VAT exemption and the impact on proportional deduction calculation
ZATCA published a Circular on its official website explaining the impact of real estate VAT exemption on proportional deduction calculation.
The Circular, issued in Arabic at the moment, also highlights areas such as the alternate mechanism for calculating the proportional deduction ratio in real estate financing cases, and can be accessed here.
Effective 4 October 2020, the VAT treatment on the supply of real estate made by a taxable person in KSA was changed from a standard rated taxable supply to a VAT exempt supply pursuant to Royal Decree No. (A/84) issued on Safar 14, 1442 H (the disposal of real estate became subject to a real estate disposal tax at 5% of the total disposal value of the property).
The above change resulted in an increase in the value of exempt supplies that a taxpayer has to use to calculate its proportional deduction ratio for computing residual input VAT. Residual input VAT represents input taxes which relates to both taxable and exempt supplies made by a taxpayer.
PwC issued a detailed newsalert on this development which is accessible through this link.
Input VAT refund for Eligible Persons
In accordance with the provisions of Articles 70 and 72 of the VAT Implementing Regulations, eligible persons not carrying out economic activities in the KSA and who have incurred VAT during the calendar year 2022, are allowed to apply for a VAT refund by 30 June 2023.
For details such as eligibility criteria, procedural aspects as well as timelines etc, please refer to the detailed newsalert issued by PwC which is accessible through this link.
Proposed amendments to the provisions of Chapter Sixteen of VAT Law – Tax evasion and penalties
ZATCA proposed amendments to the provisions of Chapter Sixteen of the KSA VAT Law related to Tax Evasion and Penalties and also suggested the addition of a new article under the same chapter.
The proposed amendments were published on the Public Consultation Platform of the National Competitiveness Center on 12 February 2023 – for public consultation.
Further information on the amendments of the VAT Law are accessible through this link.
RETT
Guide issued by GSZTCC on RETT regulations and appeal process
The General Secretariat of Zakat, Tax and Customs Committees (‘GSZTCC’) published a guideline on its official website explaining the Committees interpretation of the Real Estate Transaction Tax (‘RETT’) regulations and related appeal procedures.
The guideline, issued in Arabic at the moment, also contains guidance on the interpretation of the applicability of RETT, exemptions from RETT, application of penalties, tax evasions and appeal process on ZATCA decisions etc, and can be accessed here.
Further information is accessible through this link.
E-invoicing
Electronic Invoicing – Integration Phase – Third Group (Wave 3) Updates
On 24 March 2023, the ZATCA announced the criteria for the Electronic invoicing (E-invoicing) integration phase Wave 3 participants.
As per the announcement, VAT registered taxpayers that have an annual taxable revenue (taxable supplies) exceeding SAR 250 million during the calendar year 2022 or 2021, are required to integrate their E-invoicing solutions with the FATOORA platform starting from 1 October 2023.
The official announcement can be accessed through this link.
Further information is accessible through this link.
