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Saudi Arabia Explains VAT Rules For Transport Sector

by Lorys Charalambous,, Cyprus

16 November 2017

Saudi Arabia's tax authority has issued guidance on the value-added tax rules that will apply to transportation services when value-added tax is introduced from January 1, 2018.

The guidance confirms that under the Gulf Cooperation Council's unified value-added tax framework, the international transportation of passengers and goods is subject to a zero rate.

According to the VAT Implementing Regulations for GCC states, services related to international passenger and goods transport are zero-rated, including, but not limited to, excess baggage and seat reservation fees; and maintenance services, repair services, and services to modify qualified international transport; storage charges; port charges; parking fees; customs duties; customs clearance fees; transport-related fees; air navigation services fees; and services provided by aircraft crews.

The imposition of a zero rate means that the goods and services are not subject to value-added tax but taxable persons remain entitled to claim input tax credits.

However, domestic transport services for passengers and goods and associated services will be subject to the standard five percent VAT rate, with businesses obligated to collect tax from the traveler at the time of agreeing a supply of services. These rules are in line with international norms.

The Gulf Cooperation Council countries are Saudi Arabia, Kuwait, the United Arab Emirates, Qatar, Bahrain, and Oman, although just Saudi Arabia and the United Arab Emirates are proceeding with the introduction of VAT on schedule.

TAGS: United Arab Emirates | compliance | VAT tax authority guidance | tax | business | value added tax (VAT) | Kuwait | Saudi Arabia | Bahrain | Qatar | fees | tax credits | tax authority | Gulf Cooperation Council | Oman | services | VAT compliance matters | Regulations

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