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Saudi Arabia Clarifies VAT On Electronic Services, E-Commerce

by Lorys Charalambous,, Cyprus

15 December 2017

Saudi Arabia's tax agency has released a statement clarifying that all electronic sales and purchases are to be subject to the standard five percent value-added tax rate, with due amounts to be collected by the Customs Authority at the port of entry.

Value-added tax is to be introduced in Saudi Arabia from January 1, 2018. It had been intended that the six Gulf Cooperation Council (GCC) nations – Kuwait, Bahrain, Saudi Arabia, Qatar, the UAE, and Oman – would introduce VAT at the same time, under a unified framework. However, just the UAE and Saudi Arabia are proceeding with the introduction of VAT on schedule.

As a transitional provision, given that four of the GCC states are not yet introducing the GCC VAT, all goods coming from Gulf Cooperation Council member countries will be subject to VAT until the relevant intra-GCC electronic service system becomes operational.

Electronic services such as software, electronic subscriptions, mobile phone applications, and e-content will be subject to specific rules concerning their VAT treatment.

The tax agency has further clarified that supplies of services received by taxable persons in Saudi Arabia must be subject to VAT under a reverse charge, requiring that the Saudi taxpayer account for and remit VAT on the transaction.

According to the tax agency, regardless of the value of the supply, a non-resident supplier of services must register for VAT if the recipient is the end consumer – that is, for business-to-consumer transactions. Where services are supplied through electronic portals acting as intermediary for non-resident suppliers, the operator of the electronic portal will instead be responsible for calculating the due VAT, the agency said.

All businesses with annual revenues exceeding SAR1m (USD266,666) must register for VAT by December 20, 2017, to avoid penalties and suspension of several government services.

TAGS: compliance | tax | business | value added tax (VAT) | Saudi Arabia | VAT cross-border transactions | penalties | Gulf Cooperation Council | services | VAT compliance matters

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