21 August 2017 Indirect Tax Alert Saudi Arabian Tax Authority to commence VAT registration in September 2017 EY Global Tax Alert Library Access both online and pdf versions of all EY Global Tax Alerts. Copy into your web browser: www.ey.com/taxalerts Executive summary Saudi Arabia s General Authority of Zakat and Tax (GAZT) will commence the value-added tax (VAT) registration of companies and businesses or entities during the first week of September 2017. The GAZT has launched an official website exclusively for VAT. The GAZT has announced on its website that businesses with a threshold annual taxable supplies of goods and services in excess of SAR375,000 (US$100,000) are mandatorily required to register for VAT before 20 December 2017. However, the GAZT has relaxed the time period for the mandatory registration of businesses with annual taxable supplies of goods and services between SAR375,000 and SAR1m (US$266,667). For such businesses, an additional year has been provided to register with GAZT for VAT purposes, i.e., until 20 December 2018. In effect, only businesses with annual taxable supplies of over SAR1m are mandatorily required to register for VAT before 20 December 2017.
2 Indirect Tax Alert Detailed discussion Registration of nonresident taxable persons Nonresident taxable persons carrying on an economic activity, with no fixed place of business or permanent establishment in Saudi Arabia, are required to register with the GAZT, if they have an obligation to pay VAT in Saudi Arabia. Such nonresident taxable persons must have a Tax Representative in Saudi Arabia. The Tax Representative must be a Saudi resident, authorized by the GAZT, who will be jointly and severally liable for the payment of any VAT due to the tax authority, until such date that the GAZT confirms termination to act for that taxable person. VAT Group Registration Companies with common control (50% or more), will be eligible for VAT Group Registration. In order to benefit from grouping, each company must register individually with the GAZT and thereafter, an application for grouping can be submitted by any one member of the group, who shall act as the Group Representative. The Group Representative will be primarily responsible for VAT compliance on behalf of all the group members, and will be jointly and severally liable for any non-compliance of the VAT Group. If the application is approved by the GAZT, the VAT Group will inherit the VAT identification number of the Group Representative and the individual group member s VAT account numbers will be deactivated, thereby terminating any communication in relation to their individual filing obligations. Group Registration will be available through the GAZT e-portal after it is activated. Information required from the Group Representative The following information is required from the Group Representative member: VAT eligible sales or purchases information at the total Group level Effective date requested for Group registration Information required for other group members Tax Identification Number, if any VAT eligible sales or purchases information Proof of association with Group member with common control Articles of Association or Memorandum of Association Audited documents, such as audited financial statements Other documents evidencing common control Voluntary registration Businesses with a turnover exceeding SAR187,500 (US$50,000) annually, may voluntarily register with the GAZT. This would allow such companies to benefit from recovering input VAT credit from their purchases, thereby reducing the cost of operating business. Registration of large and very large businesses Large businesses with revenues in excess of SAR40m (approx. US$10.7m) and very large businesses (with revenues in excess of SAR2b), which are registered with the GAZT for tax, will be automatically registered by the GAZT for VAT purposes. We understand an official notification shall follow shortly from GAZT. Particulars for registration Businesses are required to provide the following particulars for registration: Whether the business is an importer Whether the business is an exporter IBAN number (for refunds) not required if already logged with GAZT VAT eligibility start date VAT taxable supplies (expected over next 12 months) VAT taxable supplies (past 12 months) VAT taxable purchases (expected over next 12 months) VAT taxable purchases (past 12 months) Financial Representative details (only mandatory if you are not a Saudi resident) Frequency of filing VAT returns Taxable persons with annual taxable supplies in excess of SAR40m will be required to file VAT returns on a monthly basis (tax period). All other taxable persons will be required to file VAT returns on a quarterly basis. However, such persons may elect to file monthly returns subject to approval by the GAZT.
Indirect Tax Alert 3 The statutory deadline to file the VAT return shall be one month from the end of the tax period. For example: If monthly returns are required for the tax period from 1 January 2018 to 31 January 2018, the VAT return must be filed by 28 February 2018. If quarterly returns are required for the tax period from 1 January 2018 to 31 March 2018, the VAT return must be filed by 30 April 2018. GAZT publishes Taxpayer Charter GAZT has published the Taxpayer Charter on its new website. The charter sets out the minimum standards to be followed by the taxpayer and the quality of services that can be expected from the GAZT and its representatives. The GAZT representatives and/or agents are expected to: 1. Provide professional service in the most effective and efficient manner at all times. 2. Provide all assistance and guidance in the VAT implementation, so that the implantation is successfully implemented. 3. Provide bilingual Service both in Arabic or English, at the taxpayer s choice. 4. Assure data protection policy of international standards, so that any information shared is protected and stored securely as per the law. Taxpayers are expected: 1. To be truthful, and provide correct and accurate information, and documents. 2. To take reasonable care and diligence in providing information, filing VAT returns and notifying the authority in the case of mistakes. 3. To file the VAT returns and make VAT payments within the statutory timeline. 4. To maintain accurate information, records and take adequate steps to protect confidential information. Next steps Businesses are required to take immediate steps to register with the GAZT and undertake a VAT impact assessment on their business, in order to be VAT-ready when the regime is implemented in Saudi Arabia on 1 January 2018.
4 Indirect Tax Alert For additional information with respect to this Alert, please contact the following: Ernst & Young & Co (Public Accountants), KSA Tax Leader, Riyadh Asim Sheikh +966 58 301 9999 asim.sheikh@sa.ey.com Ernst & Young & Co (Public Accountants), Riyadh Ahmed Abdullah +966 11 215 9439 ahmed.abdullah@sa.ey.com Amr Farouk +966 11 215 9898 amr.farouk@sa.ey.com Craig McAree +966 11 215 9898 craig.mcaree@sa.ey.com Hosam Abdulkareem +966 11 215 9805 hosam.abdulkareem@sa.ey.com Imran Iqbal +966 11 215 9807 imran.iqbal@sa.ey.com Nitesh Jain +966 11 215 9842 nitesh.jain@sa.ey.com Parvez Maqbool +966 11 215 9849 parvez.maqbool@sa.ey.com Sohail Nini +966 11 215 9825 sohail.nini@sa.ey.com Vladimir A Gidirim +966 11 215 9455 vladimir.gidirim@sa.ey.com Yousef Eldaw +966 11 215 9877 yousef.eldaw@sa.ey.com Ernst & Young & Co (Public Accountants), Al-Khobar Syed Farhan Zubair +966 13 8499 500 farhan.zubair@sa.ey.com Ali Sainudheen +966 13 8499 500 ali.sainudheen@sa.ey.com Hatem Ghobara +966 13 8499 500 hatem.ghobara@sa.ey.com Javed Aziz Khan +966 13 8499 500 javed.aziz@sa.ey.com Jude desequeira +966 13 8499 500 jude.desequeira@sa.ey.com Ernst & Young & Co (Public Accountants), Jeddah Franz-Josef Epping +966 12 221 8400 franz-josef.epping@sa.ey.com Ayman Abu El Izz +966 12 221 8400 ayman.abueizz@sa.ey.com Hanif Khatri +966 12 221 8400 hanif.khatri@sa.ey.com Hussain Asiri +966 12 221 8505 hussain.asiri@sa.ey.com Imran Ahmed +966 12 221 8400 imran.ahmed@sa.ey.com Irfan Alladin +966 12 221 8510 irfan.alladin@sa.ey.com Mohammed Desin +966 12 221 8500 mohammed.desin@sa.ey.com Rolf Winand +966 12 221 8501 rolf.winand@sa.ey.com Ernst & Young Middle East, Dubai Branch, UAE Michael Hendroff +971 4 332 4000 michael.hendroff@ae.ey.com Ernst & Young, VAT Implementation Regional Team Finbarr Sexton +974 4457 4200 finbarr.sexton@qa.ey.com David Stevens +971 4332 4000 david.stevens@ae.ey.com Jennifer O Sullivan +974 4457 4116 jennifer.osullivan@qa.ey.com Filip Van Driessche +974 4457 4271 filip.vandriessche@qa.ey.com
EY Assurance Tax Transactions Advisory About EY EY is a global leader in assurance, tax, transaction and advisory services. The insights and quality services we deliver help build trust and confidence in the capital markets and in economies the world over. We develop outstanding leaders who team to deliver on our promises to all of our stakeholders. In so doing, we play a critical role in building a better working world for our people, for our clients and for our communities. EY refers to the global organization, and may refer to one or more, of the member firms of Ernst & Young Global Limited, each of which is a separate legal entity. Ernst & Young Global Limited, a UK company limited by guarantee, does not provide services to clients. For more information about our organization, please visit ey.com. Indirect Tax 2017 EYGM Limited. All Rights Reserved. EYG no. 04758-171Gbl 1508-1600216 NY ED None This material has been prepared for general informational purposes only and is not intended to be relied upon as accounting, tax, or other professional advice. Please refer to your advisors for specific advice. ey.com