Saudi Arabia publishes draft VAT law

Saudi Arabia Tax Authority has published the value added tax (VAT) draft law on its website for the purpose of public consultation.

The General Authority for Zakat and Tax (GAZT) has announced on its website that the Kingdom will implement VAT on 1 January 2018, simultaneously with other GCC member states.

The draft VAT law is based on the VAT principles agreed in the Unified GCC Agreement for Value Added Tax published in the Official Gazette on 21 April 2017.

Most of the details of application of VAT including specific VAT requirements are left to the implementing regulations which are expected to be issued in the next few weeks. However, some interesting points are as follows:
  • VAT is expected to be introduced on 1 January 2018;
  • VAT Grouping is going to be allowed (two or more legal persons can be registered as a single VAT entity) [Article 5];
  • regulations will set out supplies which will be exempt from VAT or zero-rated; [Articles 15 and 16];
  • cash accounting may be allowed in certain circumstances [Article 26];
  • sales of used goods may be subject to a margin scheme [Article 28];
  • an extension of time to pay tax due may be allowed in specific circumstances [Article 40];
  • the tax authorities will have the ability to assess for tax due if returns are not submitted [Article 42];
  • financial security may be required for the protection of the public revenue [Article 44];
  • the authorities may confiscate goods  and sell property if they have grounds to believe that the taxable person will not pay the tax due [Article 45];
  • people involved with a Tax payer who violates the VAT legislation could be held jointly and severally liable with the Taxpayer for any tax loss [Article 46];
  • tax refunds can be claimed but may be held against future VAT liabilities [Article 47];
  • there will be stringent penalties for non-compliance [Chapter 11].
Since VAT implementation date has been confirmed to be 1 January 2018, persons affected with VAT and operating across the GCC need to activate their VAT implementation plans to ensure they are ready to comply with the VAT requirements by 1 January 2018.

If you would like further information on the above, please contact Terri Bruce.

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