E-commerce business subject to VAT in Saudi Arabia

E-commerce business subject to VAT in Saudi Arabia
Updated 13 December 2017

E-commerce business subject to VAT in Saudi Arabia

E-commerce business subject to VAT in Saudi Arabia

RIYADH: The General Authority of Zakat and Tax (GAZT) announced that electronic sales and purchases are subject to the value added tax (VAT) of 5 percent, and that Customs will collect it when goods enter the Kingdom through border crossing points.

GAZT affirmed that VAT will be applied to goods imported from the GCC countries as a temporary measure until activation of the electronic service system between the GCC countries.

Electronic services such as software, e-subscriptions, mobile applications, and digital content will be governed by special laws that determine how the VAT is applied to them.

GAZT stated that if the supply is a service from outside the Kingdom, the recipient in the Kingdom must calculate the tax according to the reverse charge mechanism, if he subject to paying taxes.

The reverse charge is defined as a mechanism by which the recipients of taxable services calculate the VAT payable instead of the non-resident supplier.

GAZT said that if the service recipient is the final consumer, the non-resident service provider must register in the Kingdom for VAT purposes, regardless of the volume of its supply.

In cases where electronic services are provided via electronic platforms acting as intermediaries for non-resident suppliers, these platforms will be responsible for the calculation of the tax value, rather than on behalf of non-resident suppliers.

GAZT called on all qualified entities to be fully prepared to apply the tax on January 1, 2018 and to access www.vat.gov.sa/ar. The website contains a “guide” that provides a simplified explanation of the basic concepts that enterprises need to apply for the value added tax, as well as a wide range of tools and information that serve as a reference for enterprises to achieve their readiness.

GAZT has called on enterprises with annual revenues exceeding SR1,000,000 ($266,630) to register for the VAT before December 20, 2017, in order to avoid fines and suspension of many government services.