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VAT Forum

Oil and Gas, Mining, Utilities and


15th August 2017

General Authority of Zakat & Tax p1 1

The binding GCC VAT Framework was approved in June 2016 The
KSA has committed to implement VAT on January 1st 2018

VAT / GST Implementation across the world Implementation of VAT in the KSA

January 1st 2018

Achieving budgetary balance 1 Confirmed launch date of
strengthening financial VAT in the KSA
governance, increasing non-oil
revenues and improving spending
on programs and projects. 5%
Standard VAT rate for
Value Added Tax (VAT) / Goods and Services products and services
Tax (GST) is adopted in 160+ countries across
the world

Country with VAT / GST

Country with no VAT

General Authority of Zakat & Tax p2 2
Purpose of todays discussion

1 Provide additional details on the VAT Law and Regulations

2 Provide an overview of VAT treatment by industry

3 Provide a deep-dive on the VAT treatment of Oil and Gas, Mining, Utilities and Automotive

4 Introduce the process for registration

5 Introduce invoicing requirements

6 Provide an overview of the VAT return filing process

7 Provide an overview of penalties and appeals

8 Provide an overview of information channels

9 Outline next steps and Q&A

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Chapter 1
VAT Law and Regulations

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The KSA VAT legal framework is governed by the GCC Agreement and
further clarified by the KSA VAT law and Implementing Regulations

Legal Framework Status Key Points

Sets broad principles of VAT with some mandatory elements

GCC Finalized & Agreement implementation and enforcement is responsibility of
Agreement Published each state

Primary legislation in KSA:

Final law Gives effect to GCC agreement, governing how VAT is
published administered
Sets out VAT implementation and VAT compliance enforcement
VAT Regulations are the secondary domestic legislation to provide
VAT Implementing Draft regulations further details
Regulations published Provide additional rules and interpretation of the GCC agreement
and the VAT Law

Tax Rulings (as required)

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The VAT Implementing Regulations comprise 12 chapters and 83 articles

VAT Implementing Regulations Structure VAT Implementing Regulations Structure 83 Articles

1: Definitions

GCC 2: Taxable persons

3: Supplies of goods and services

4: Place of Supply

VAT Law 5: Exempt Supplies

0 6: Zero-rated Supplies

7: Taxable Value of Supplies

VAT Implementing
Regulations 8: Imports

9: Calculation of Tax payable

10: Procedure and administration

Tax Rulings (as required) 11: Refunds of Tax

12: General provisions

General Authority of Zakat & Tax p6 6

All material in this
presentation is
based on the draft

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Chapter 2
VAT treatment by industry

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KSA follows a broad taxation policy with limited number of zero-rated and
exempt items

Overview of VAT rates and their implications

Output tax Input tax deductible

1 Standard rated 5%

2 Zero-rated 0%

3 Exempt nil

4 Out of scope N.A. N.A.

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The GCC Agreement specifies sectors with Mandatory Treatment across

all GCC with same rules in each country

List of sectors specifically mentioned in the GCC Agreement Mandatory by Agreement

Supply of medicine and Internal (intra-GCC) / intl Supplies of investment Supplies outside the GCC
medical equipment Transportation gold, silver, and platinum Territory
(including financial services to
customers outside the GCC)

GCC Agreement Article (31): GCC Agreement Article (32): GCC Agreement Article (35): GCC Agreement Article (34):
Mandatory zero-rated according to Mandatory zero-rated for Mandatory zero-rated if they are Mandatory zero-rated if goods are
unified controls proposed by the Intra-GCC and Extra-GCC at least 99% pure and tradable in exported outside the GCC territory
ministers of health committee transportation international bar market

KSA: Mandatory zero-rated KSA: Mandatory zero-rated KSA: Mandatory zero-rated KSA: Mandatory zero-rated

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The VAT treatment of some sectors has been determined by the KSA

Supply of basic food Certain Sectors Oil, oil derivatives and Domestic Financial
items (Domestic transportation, Real
gas sector Service
estate, Educational and Healthcare
Article (31): Voluntary zero- Article (29): Voluntary exempt Article (29): Voluntary zero- Article (36): Financial Services:
GCC Agreement rate food items mentioned or zero-rate rate Voluntary exempt or zero-rate
Direction under unified controls

All food including items within Domestic transportation Domestic consumption Fee and commission based
GCC list. Private education products
Standard rate
Private healthcare
in KSA Commercial real estate
Supply of residential RE
No exemptions Rent of residential real estate No exemptions All margin-based products
Exempt or out of Supply of residential real (Majority of financial prod.)
scope estate for own / close relative Capital markets activity
in KSA use out of scope Life insurances

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Beyond the specific sector treatment, there are several policy decisions
targeted at facilitating the VAT implementation in a practical way

Policy items to facilitate VAT implementation

Bad debt Companies unable to collect receivables that are due at least twelve
months may reduce the Output Tax if requirements are met (Article 38)

Frequency Filing of Tax Return every month only for companies with annual supplies
of filing > SAR 40 MN and quarterly for < SAR 40 MM (Article 56)

2 or more KSA residents can register as a VAT Group in case they are
VAT grouping under common controls (Article 10)

Margin VAT is charged on the profit margin of the used goods only limited to
scheme used car sales (Article 46)
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Chapter 3
Regulations deep-dive: Oil and Gas,
Mining, Utilities and Automotive sectors

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4 articles from the GCC Agreement and the Implementing Regulations have high
relevance to the Oil and Gas, Mining, Utilities and Automotive sectors (1/2)

Unified VAT Agreement Unified VAT Agreement Unified VAT Agreement KSA VAT Implementing
for the GCC for the GCC for the GCC Regulations

Chapter 9:
Chapter 3: Chapter 6: Chapter 6:
Calculation of
Place of supply Exceptions Exceptions
Tax payable

Article 14 Article 34 Article 35 Article 46

Supply of Gas, Oil, Supplies outside Supplies of investment Supplies of used
Water and Electricity GCC Territory gold, silver, and platinum

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4 articles from the GCC Agreement and the Implementing Regulations have high
relevance to the Oil and Gas, Mining, Utilities and Automotive sectors (2/2)

Article Key takeaway

The place of supply shall be the place where the Taxable Trader is
established or the place of actual consumption Focus

GCC 34 Exports outside GCC territory are mandatorily zero-rated


Investment gold, silver and platinum are mandatory zero-rated if they are
at least 99% pure and tradable in international bar market

Supply of used goods (used motor vehicle situated in the Kingdom)
Implementing 46
benefit from the profit margin scheme
Regulations Focus

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The place of supply for Gas, Oil, Water and Electricity is specified in the GCC
Agreement Taxation is either where an energy trader is established or where
actual consumption occurs
Place of supply for Gas, Oil, Water and Electricity
B2B vs. B2C
GCC VAT Agreement (Article 14)

B2B (Taxable The place of supply [] by a

trader) Country where the Taxable Person who is
Taxable Trader is established in a Member State
1 to a Taxable Trader1
established receives established in another Member
VAT State shall be the place where
the Taxable Trader is
Place of supply established.
B2C (Consumer or
non taxable trader) The place of supply [] to a
Country where the
person who is not a Taxable
Determines the country 2 actual consumption Trader shall be the place of
receiving VAT takes place receives VAT actual consumption

1. A Taxable Person in any Member State whose main activity is the distribution of Oil, Gas, Water or Electricity.

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Under the margin scheme a used car dealer will charge VAT only on the
margin created by his operation
Sale of new goods Resale of used goods

New car SAR First SAR Used car SAR Second

showroom owner workshop owner

30,000 20,000 25,000 SAR + 250


1 2 NO VAT in 3 Creation of an additional 5,000

Transaction falls within the
VAT scope of standard VAT transaction SAR in value the margin
treatment VAT charged only on the margin:
5% x 5,000 = 250
Used car workshop cannot claim any input tax on the purchase of the car as VAT was not included in the
Summary price
Used car workshop charges 5% VAT only on the 5,000 SAR margin.
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3 key considerations should be highlighted in VAT collection from imports

Value of imports Collection of VAT on imports Treatment of intra-GCC trade


Value of imported goods into VAT payable on imports into the KSA will treat intra-GCC
the KSA for VAT purposes, is KSA will be collected by the products the same as extra-
the customs value of the goods Customs Department at the GCC imports until the
plus any applicable: time of the import full-integration of the
Customs duties Taxpayers can seek GAZT Electronic Services System.
Excise duties approval to pay import VAT via KSA VAT Implementing
Insurance duties VAT return as opposed to Regulations provide a
Freight duties collection by Customs transitional provision explaining
Any other fiscal charges this in further detail

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At launch, import VAT will be collected on all goods at KSA borders

regardless of the country of origin

1st release: VAT collected by Customs regardless of country of origin

Payment excl. VAT

UAE Supplier Business

Purchase Invoice
(VAT information not relevant KSA importer
and not required) pays VAT to
KSA Customs
before goods
are cleared
Total VAT collected on imports
transferred to GAZT on a bi-weekly

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Once the GCC Integrated System is put in place, Customs will not collect import
VAT on GCC imports and the reverse-charge mechanism will apply

KSA Business does not pay VAT to UAE

2nd release: Reverse-charge mechanism applies supplier
Saudi Customs do not collect VAT
Payment (no VAT)
UAE Supplier KSA

Invoice with 0% VAT Invoice

Invoice must include valid
VAT number of KSA

KSA Business declares VAT on intra-

GCC transaction to GAZT through its
periodic VAT returns

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Chapter 4

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A pre-registration process has been undertaken by GAZT to pro-actively

identify VAT-eligible taxpayers

Large business identified and pre-registered by GAZT

Large taxpayers are very likely to be covered and should

receive a communication informing them of their registration:

Data sources from GAZT and other

entities have been used to develop
a pre-registration tax roll
This will save time for pre-registered
taxpayers and help maximise
participation from Day 1

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If your company has been pre-registered you will need to log on to verify
your information

Access is through the registration portal

Open GAZT web site
and click on User Login

Enter existing User ID and Password

and click sign in

Enter one time log-in code that is sent to

the GAZT-registered mobile number by
SMS (same as for other taxes)

The GAZT Taxpayers Dashboard will


Here there will be a tile where taxpayers

can register for VAT (if not already pre-
registered) or change their registration

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If your company has not been pre-registered then you will need to
complete the online self-registration process

Self-registration process overview and steps for taxpayers

Applicants must have a TIN to
register for VAT

Registration can be completed by

filling <10 fields in ~3 minutes:
Are you an importer?
Are you an exporter?
IBAN (optional)
VAT eligibility start date
Financial details
- Expected & historical supplies
- Expected & historical
Financial representative details
(only mandatory for non-KSA

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Chapter 5
Invoicing requirements

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The requirements for invoicing are laid out in Article 51 of the regulations

Mandatory contents for invoice to align with VAT as per Article 51

1 Legal name and address of Supplier and Customer 7 The quantity and nature of the Goods and services

2 The date of issue 8 The taxable amount per rate or exemption

3 A sequential number uniquely identifying the invoice 9 The rate of Tax applied

Explanation of tax treatment in case of non-standard

4 The VAT number of the Supplier 10 rate
Customer's Tax Identification Number (if the customer
5 is required to self-account for tax) 11 Explanation in case a margin scheme has been used

6 Date of supply (if different from the date of invoice) 12 The Tax amount payable, shown in riyals

Items specific to VAT compliant invoice

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VAT compliant invoice in accordance with the regulations

Example VAT compliant invoice and key requirements in accordance with regulations

Legal name and VAT Invoice A sequential

the address of the From: Company Name Issue Date 01 Jan 2018 number uniquely
Supplier and of the Address Line 1 Invoice number 00001 identifies the
Address Line 2
Customer Due date 31 Jan 2018 Invoice
From: Receiving Company Name VAT no. of supplying company 0000000001003
Address Line 1
If a customer Address Line 2
VAT number VAT number of
is required to self-
the Supplier
account for VAT Item
Code Descriptio Date of Total price VAT VAT Total
on the Supply, the Ser. (SKU) n supply Qty. excl. VAT % SAR SAR
Customer's VAT 1 0001 First item 01/01/18 10 100.00 5 5.00 105.00
Number1 and a 2
statement that the 3
Customer must Notes SAR
Narration explaining the VAT
account for the Total excl. VAT 100.00
treatment of the Supply in
Tax is to be VAT 5.00 Tax amount
case a different rate than the
Total 105.00 payable, shown
standard rate is applied Balance due 105.00 in Riyals
1: The regulations stipulate that the invoice should contain the Tax Identification Number of the supplying company, in the case of a VAT invoice, this should be replaced by a VAT number
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Chapter 6
VAT filing and refunds

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Your volume of annual taxable supplies determines when you need to

start filing and the frequency of your filing obligation

Annual Taxable Supplies

SAR 1MM to 40MM Above SAR 40MM

Filing frequency: Quarterly Filing frequency: Monthly

First filing period: Jan-Mar 2018 First filing period: Jan 2018
First filing deadline: 30-Apr 2018 First filing deadline: 28-Feb 2018

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The VAT return form is designed to be as simple and user friendly as


3- VAT Return Form Amount (SAR) Adjustment (SAR) VAT Amount (SAR) Highlighted boxes will
1 Standard rated domestic sales update automatically
VAT on Sales

2 Sales to registered customers in other GCC states 2

3 Zero rated domestic sales 1 Adjustments are typically used if there is a
Amounts relating to
4 Zero rated exports change in circumstances (e.g. goods sold in
5 Exempt sales
sales and purchases
are inputted manually a previous period were returned in current
6 Total Sales period)
by the taxpayer
VAT on Purchases

7 Standard rated domestic purchases

8 Imports subject to VAT paid at customs
9 Imports subject to VAT accounted for through reverse charge
10 Zero rated purchases
11 Exempt purchases Corrections due to
12 Total purchases errors or omissions from
13 Total VAT due for current period a previous return can
14 Corrections from previous period (between SAR 5,000) 4 be made in the return
15 VAT credit carried forward from previous period If net VAT due is
form if amount is < 5,000
16 Net VAT due (or reclaimed) negative, your
business may be
due a refund
Back Attachments Validate Next

General Authority of Zakat & Tax p 30 30

Chapter 7
Penalties and Appeals

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In addition to the specifications in the regulations, further updates have

been made to the penalty framework in the VAT law
Example conditions under which a penalty is imposed Level of penalty

5% - 25% of the value of the tax that must have been

Failure to submit VAT returns when due

Failure to pay the Tax when due 5% of the value of unpaid tax for each month or part thereof

Issue of a VAT invoice as an unregistered person SAR 100,000 or less

Failure to maintain the prescribed tax invoices,

SAR 50,000 or less
books, records and accounting documents
Submission of false, forged or artificial documents,
Not less than 100% of tax due
declarations, records and information
Entering or attempting to enter and removing or
attempting to remove goods outside of KSA without < 3X value of goods and services subject of evasion
paying tax

Obstruction of GAZT officer from performing duty SAR 50,000 or less

Failure to register for VAT SAR 10,000

1. If the same violation is repeated within three years from the date of issuing the Authority's decision of the violation, it is permissible to double the fine imposed on the offender under that
General Authority of Zakat & Tax
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Decisions can be reviewed by GAZT in the first instance, or escalated to

the Judiciary Committee if the review decision is unsatisfactory

Judiciary Committees for the Settlement of Tax

Violations & Disputes
(Independent appeal committees)

1 The VAT First Instance Committee 2 The VAT Appeal Committee

The appeal is raised with the First instances If the taxpayer is still not satisfied with the decision
committee, within the VAT committee for the they can raise the issue with the VAT appeal
settlement of Tax violations & Disputes committee
Issuance of a final and binding decision
Requests must be submitted within 30 days from
the first instance committee decision date

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Chapter 8
Information Channels

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GAZT offers 5 information channels to help all companies be informed

and up to date

Call center Inbound call center to provide you with information: 19993

Further details of upcoming events and sector specific workshops will be

Events available in future and through the website

Edition 1 already published

Monthly VAT newsletters planned until 1st Jan 2018

You can also contact GAZT by email on

Main broadcasting channel for official VAT information

Website (Details on next page)

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VAT.GOV.SA is now online and will be used as the core communication

channel for VAT
Key pages and features Zoom on next pages

Introduction to Dedicated sections Readiness reporting

VAT for businesses of large tax payers

What is VAT and how Dedicated sections for Every LTP will be
it works explanation LTPs vs. SMEs issued a VAT.GOV.SA
Extensive FAQ sections Guidance how to get account
for LTPs and SMEs VAT ready Regular readiness
Taxpayer Charter List of VAT channels to status reporting online
help stay informed via dedicated platform

VAT e-services VAT e-learning News & Media

Description of VAT Official centre of VAT news and press

procedures (registration, knowledge and releases
returns, etc.) information about VAT Calendar of public VAT-
Demo videos and in Saudi Arabia (e.g. related events
manuals videos, courses and
materials to learn about Media gallery
Links to complete VAT VAT)
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Demo of how to use the VAT Readiness tool on VAT.GOV.SA (1/5)

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Demo of how to use the VAT Readiness tool on VAT.GOV.SA (2/5)

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Demo of how to use the VAT Readiness tool on VAT.GOV.SA (3/5)

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Demo of how to use the VAT Readiness tool on VAT.GOV.SA (4/5)

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Demo of how to use the VAT Readiness tool on VAT.GOV.SA (5/5)

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Chapter 9
Next steps and Q&A

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Key milestones in the coming weeks

Launch of website and comprehensive readiness tracker today

Opening of the pre-registration process and notification via SMS and email

Publication of regulations before 27th August

Opening of self registration on 28th August

Publication of further guidance material including monthly VAT newsletters

Todays presentation material will be uploaded to the VAT website

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