Transitional Provisions Guidelines of VAT Rate Increase to 15%
On July 1, 2020 Saudi Arabia will begin to implement the new value added tax (VAT) increase from 5% to 15% to counter the economic implications of the coronavirus (COVID-19) pandemic. To help mitigate the change, The General Authority of Zakat and Tax (GAZT) released at interactive guideline with useful links and important clarifications on the below topics:
- How to deal with signed contracts prior and post to VAT rate increase to 15%
- How to deal with tax invoices issued prior and post to VAT rate increase to 15%
- How to deal with imported shipments placed prior to July 1, 2020
HOW TO MANAGE WITH SIGNED CONTRACTS PRIOR AND POST TO VAT RATE INCREASE TO 15
Between a VAT Registered Business and Governmental Body
- For Contracts Signed before May 11, 2020
If the contract is signed before May 11, 2020 and the supply will continue on or after July 1 2020, a 5% VAT will be applicable to the supplies related to that contract till the end date of the contract, contract renewal date or June 30, 2021, whichever comes first.
- For contracts signed between May 11, 2020 and June 30, 2020
If the contract is signed on or after May 11, 2020 and before July 1, 2020, a 5% VAT rate will be applicable to the supplies actually provided on or before June 30, 2020, and 15% VAT will be applied on supplies actually provided on or after July 1, 2020.
Between two VAT Registered Business
- For Contracts Signed before May 11, 2020
If the contract is signed before May 11, 2020 and the supply will continue after July 1, 2020 and the customer has the right to deduct the VAT related to this supply in full, a 5% VAT will be applicable to the supplies related to that contract till the end date of the contract, contract renewal date or June 30 2021, whichever comes first.
- For Contracts Signed between May 11, 2020 and June 30, 2020
If the contract is signed on or after May 11, 2020 and before July 1 2020, a 5% VAT rate will be applicable to the supplies actually provided in that contract on or before June 30 2020, and 15% VAT will be applied on supplies actually provided on or after July 1, 2020.
HOW TO MANAGE WITH TAX INVOICES ISSUED PRIOR AND POST TO VAT RATE INCREASE TO 15%
- Tax Invoices Issued prior to May 11, 2020
If the invoice is issued before May 11, 2020 and the supply in relation to that invoice has been done on or after July 1, 2020, a 5% VAT rate will be applicable on that supply with a condition that the actual supply is done before the end of June 30, 2021.
- Tax Invoices Issued between May 11, 2020 and June 30, 2020
If the tax invoice is issued in the period between May 11, 2020 and June 30, 2020, a 5% VAT will be applicable to that supply provided that the actual supply should happen before the end of June 30, 2020, all supplies on or after July 1, 2020 will be subject to 15% VAT rate.
- Periodic Tax Invoices Issued for Continuous Supplies
If a tax invoice is issued for continues supplies partially executed before and on or after July 1, 2020, a 5% VAT rate will be applicable to the invoice related to the part executed before July 1, 2020 and a 15% VAT rate will be applicable to the invoice related to the part executed on or after July 1, 2020.
HOW TO MANAGE WITH IMPORTED SHIPMENTS PLACED PRIOR TO JULY 1, 2020
A 15% VAT will be applied to all imports received on or after July 1, 2020, regardless of date of purchase. The 5% VAT applies only in case the importation is fulfilled on or before June 30, 2020.
Source: General Authority of Zakat and Tax
