1. Scope of tax
The following types of supplies are subject to tax.
Import of goods
VAT becomes chargeable at the point of entry into the KSA, unless goods are placed under customs duty suspension. For goods placed under customs duty suspension, a cash security or bank guarantee will be required to cover the VAT.
VAT on import of goods is charged after the formal import clearance is made in the KSA based on the information provided in the customs declaration.
ZATCA will automatically calculate the VAT based on the declared value and the applicable VAT rate for each different tariff entry on the customs declaration. VAT might also be payable to the suppliers of handling, storage, or other services to ZATCA.
In case of re-imported goods, Saudi Customs will calculate VAT on the basis of the value added to them.
Generally, VAT is applicable at the rate of 15% on the import of goods. However, imports of some goods may be exempt or zero-rated in the following cases:
- The imports of qualifying medicines, medical goods, precious metals may be subject to VAT at a zero-rate.
- The import of goods exempted under Saudi Arabia Cabinet Decision No. M241/1423, for example diplomatic exemptions, military exemptions, etc. are also considered exempt for VAT purposes.
- The import of personal luggage and gifts of non-commercial nature up to SAR 3,000 accompanied by travelers entering the KSA is exempt for VAT purposes.
- Any VAT charged on import of goods must be paid to Saudi Customs, together with customs duty and other charges indicated on the customs declaration. The customs declaration is made either by the importer or his representative using an electronic form.
The import VAT paid by the taxable persons is recoverable subject to the general recovery conditions. The taxable person can deduct the import VAT incurred at customs in ‘box 8' of the VAT return.
Taxable persons may apply to ZATCA for approval to pay VAT on imports of goods through the VAT return. The request can only be made if the taxable person files the VAT return and imports goods on monthly basis, provides evidence of its continuing financial stability and meets all the obligations in respect of VAT. ZATCA has temporarily allowed that the import VAT is deferred to the VAT return instead of having to be paid to ZATCA upon importation.
Non-taxable persons who import goods exceeding SAR 10,000 into Saudi Arabia through a forwarding agent have to pay VAT charged by ZATCA based on the customs declaration.
Import of services
As per the general VAT rule, the place of supply of services is the place of residence of the supplier. However, if the services are supplied by a supplier who is not resident in the KSA to a taxable person in the KSA, the place of supply of the services will be in the KSA for VAT purposes.
Special place of supply rules apply on services such as transportation, services linked to real estate, telecommunication, restaurant, hotels, sports, educational and so on. VAT obligations with respect to these services are determined on the basis of respective place of supply rule.
The KSA taxable person receiving services in the KSA is required to account for VAT through reverse charge mechanism. It is a simplification measure where a taxable recipient of services accounts for any VAT due as opposed to the taxable supplier, i.e. the customer acts as if he is both the supplier and the recipient for VAT purposes and self-assesses any VAT due.
In case the services are supplied by a non-resident supplier to a non-registered KSA customer then the supplier will be required to get registered in the KSA for VAT purposes.
The services are included under the reverse charge mechanism at a standard VAT rate of 15% (unless the services are zero-rated or exempt) in ‘box 9' of the VAT return.