Value Added Tax (or VAT) is an indirect tax imposed on all goods and services that are bought and sold by businesses, with a few exceptions. VAT is applied in more than 160 countries around the world as a reliable source of revenue for state budgets.
VAT is imposed at each stage of the supply chain from the production and distribution to the final sale of the good or service.
The consumer pays the VAT cost on purchased goods and services. Businesses pay the government the VAT collected from their customers’ purchases and refund the VAT they paid to their suppliers.
In June 2016, the GCC countries agreed to impose VAT across the GCC region. In February 2017 (Jumada Al-Awwal 1438), Saudi Arabia ratified the GCC VAT framework and committed to impose VAT with effect from January 1, 2018 (Rabi Al-Thani 14, 1439). VAT will be introduced at a standard rate of 5%.
The General Authority of Zakat and Tax (GAZT) is responsible for managing the implementation, administration and enforcement of VAT in Saudi Arabia. It does so in close coordination with other relevant entities.
The Law and Implementing Regulations outlined in this section articulate and define the rules and procedures regulating the implementation of VAT and the legal parameters of the words, articles and statements pertaining to VAT Law and VAT Implementing Regulations.
The Unified Agreement for Value Added Tax (VAT) of the Cooperation Council for the Arab States of the GulfThe Unified Agreement for VAT of the Cooperation Council for the Arab States of the Gulf was published by UM AL-QURA in its issue number 4667 dated H1438/7/24. This agreement is to set forth the unified legal framework to introduce VAT in the GCC states, which will be imposed on the supply of goods & services. The Kingdom's approval of the agreement was issued by Royal Decree (number m/51 dated H3/5/1438).
In order to access the Unified Agreement for VAT of the Cooperation Council for the Arab States of the Gulf, please follow this link.
This Unified Agreement for VAT of the Cooperation Council for the Arab States of the Gulf must be transposed into domestic legislation across the GCC Member States, as such KSA VAT Law and draft Implementing Regulations have been developed.
The VAT Law defines the introduction of VAT outlined in the Unified Agreement for VAT of the Cooperation Council for the Arab States of the Gulf, it will be applied on 1st January 2018 (H1439/4/14).
The VAT Law was officially approved and published on H1438/11/4.
In order to access the VAT Law, please follow the link .
VAT Implementing Regulations:
The VAT Implementing Regulations expand on the areas covered within the KSA VAT Law, detailing rules for implementation and giving taxpayers sufficient information to complete their VAT compliance requirements. The Implementing Regulations cover:
- Taxable Persons
- Supplies of Goods and services
- Place of Supply
- Exempt Supplies
- Zero-rated Supplies
- Value of Taxable Supplies
- Calculation of Tax payable
- Procedure and administration
- Refunds of Tax
- General provisions
The VAT Implementing Regulations were officially approved on H1438/12/4. In order to access the VAT Implementing Regulations, please follow the link.