VAT News

Saudi Arabia-Draft VAT law introduced

This week, Saudi Arabia has released its 41 page draft VAT legislation ahead of the expected launch of VAT on 1 January 2018. As expected, it is very much based on the EU VAT model.

Whilst the legislation provides some useful guidance for assessments and implications, the true detail will follow at a later date in the form of the implementing regulations.

Some key points taken from the draft legislation are as follows:

·         Voluntary registration will be possible (although it is intimated that there will be a minimum turnover)

·         Auto-registrations will be effected by the tax authorities as required

·         VAT grouping will be permitted

·         Anti-avoidance measures will be put in place so that VAT grouping is not used in an abusive way

·         Deregistration will be permitted for resident businesses if the above-mentioned voluntary threshold is not breached in the last year

·         Non-resident deregistration will be permitted if no supplies have been made in the previous year

·         Intra-GCC transfers will be subject to VAT (albeit the regulations may provide for alternative treatment)

·         Tax points will be covered in the regulations

·         The place of supply rules are not at all clear. These should be clearer in the regulations

·         Exempt/zero rated supplies will be listed in the regulations

·         A bad debt relief mechanism will apply

·         Customs duty (and possibly import VAT) suspension regimes will exist

·         Import valuation rules will be covered in the regulations

·         Import VAT deferment may be possible

·         Certain businesses will be able to use cash accounting

·         A domestic reverse charge may apply

·         There will be a second hand goods margin scheme

·         Regulations will provide conditions for pre-registration input tax recovery

·         Partial exemption conditions will also be within the regulations

·         A capital goods scheme will operate

·         Time limits for invoicing and conditions for simplified invoices will be within the regulations

·         Regulations will set out the length of tax periods, and taxpayers may request amendments

·         Time to pay arrangements will exist

·         A statute of limitation period will be within the regulations

·         The tax authority may request a financial guarantee to effect registration

·         Businesses can request net refunds of VAT, otherwise a credit will carry forward

·         Non-businesses may be able to apply for refunds (government bodies etc.)

·         8th/13th directive type claims will be possible

·         Numerous penalties for late registration, errors, late payments, evasion, unauthorized invoicing, and administrative errors

·         Suspension of penalties may be possible in certain instances

A consultation period is now open until June 29th for businesses to make comments upon the proposed legislation.

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