VALUE ADDED TAX (VAT) LAW

VALUE ADDED TAX (VAT)
LAW

In Saudi Arabia, Value Added Tax (VAT) refers to an indirect tax that customers pay on specified goods and services. The VAT Law, within the framework of Saudi Arabia’s Corporate Laws & legislation, outlines the VAT implementation provided in the Cooperation Council for Arab States of the Gulf’s Unified VAT Agreement.

Value Added Tax (VAT) is an indirect tax on the consumption or use of goods or services; it is applied across the stages of the supply chain, from when the manufacturer purchases raw materials until the retailer sells the goods to the consumer. Registrants for VAT will collect the VAT applicable to their taxable activities from their customers and pay the tax collected to the authorities. Any natural and legal person who carries on an economic activity is subject to VAT and is required to register for VAT.

ISSUER OF THE VALUE ADDED TAX (VAT) LAW

This law, which came into effect on January 1, 2018, is administered by the General Authority of Zakat and Tax (GAZT), the government agency responsible for overseeing tax-related matters in Saudi Arabia.

 

WHO IS SUBJECT TO THE ‘VALUE ADDED TAX (VAT) LAW’?

The Value Added Tax (VAT) Law in Saudi Arabia applies to a wide range of individuals and entities involved in economic activities within the Kingdom. Those subject to the VAT Law include:

  • All types of businesses, whether they are sole proprietorships, partnerships, limited liability companies, joint-stock companies, or any other form of business entity.
  • Entities involved in importing or exporting goods and services to and from Saudi Arabia.
  • Consumers pay VAT on the goods and services they purchase.
  • Taxable persons.
  • Entities providing services in Saudi Arabia, whether local or foreign.
  • Suppliers of Goods and Services.
  • Foreign businesses providing taxable goods or services to customers in Saudi Arabia.

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