KSA Sellers VAT FAQS

What is VAT?

Value Added Tax, or abbreviated to “VAT”.

VAT is an indirect tax that applies to sales and purchases i.e. it is a transaction based tax. VAT operates at each level of the supply chain from producer, manufacturer, wholesaler and retailer; this ultimately ensures that VAT is accounted for at each stage of the supply chain until it finally rests with the end user.

 

What is the rate of VAT?

The standard rate of VAT in the KSA is 5%.

Specific goods and services may be subject to the 0% rate of VAT or may be VAT exempt.

VAT will be charged at 0% in respect of the following main categories of supplies in the KSA:

  • Export of goods outside the KSA.
  • Services provided to non-GCC residents.
  • Transportation services for Goods or passengers outside KSA and related supplies.
  • The first supply of investment metals by its producer.
  • Medicines and medical equipment.

 

When do I need to register for VAT?

All companies, businesses or entities which make an annual taxable supply of goods and services in KSA in excess of SAR 375,000 are legally required to register for VAT.

If you are VAT registered in KSA and have received a VAT registration number issued by the GAZT, you can enter your information relating to VAT on the selling center here.

Remember: it’s the responsibility of each Souq.com Marketplace seller to ensure they are VAT-compliant and you should seek professional advice if you are unsure of your obligations.

 

What if I already have an income tax number in the KSA?

The VAT registration application is a standalone process and you will be issued with a Tax Registration Number (VAT Number) that is different to the number obtained in relation to other taxes. This number must be used for the purposes of conducting your VAT related business activities only.

 

How is VAT charged?

In order to charge VAT you must first be registered for VAT and obtain a VAT number.

Once you are VAT registered, you are bound by the VAT rules applicable to the country in which you are registered but it normally means that you must charge VAT (where applicable) on your sales and show this VAT on a tax invoice (please consult your tax adviser for specific advice regarding invoicing requirements).

Please note that you should check VAT reporting and invoicing requirements in each country in which you register.  Although these requirements are similar there can be notable differences. Please see section below regarding VAT invoicing.

 

How do I know if I should charge VAT on my supplies?

A person who is required or elects to register for VAT must charge and collect VAT on supplies of most goods and services.

As a KSA VAT registered seller you are required to charge 5% VAT on all orders shipped to customers in the KSA, unless the sale is subject to the 0% VAT rate.

 

Is VAT paid recoverable?

VAT can be reclaimed in certain circumstances through your VAT return.

Once you are VAT registered in the KSA, if you incur KSA VAT on expenditure relating to your business activities you can recover this VAT by way of your VAT return, i.e. the VAT incurred on your purchases/costs can be offset against the VAT due on your sales. VAT incurred on costs is referred to as input VAT.

A valid VAT invoice or import documentation is generally required to support a claim for VAT.

In connection with certain expenses detailed in the KSA VAT Implementing Regulations, VAT cannot be recoverable.

 

What is meant by VAT exempt?

Exempt activities refers to those that are not liable to VAT. VAT is generally irrecoverable by persons engaged in VAT exempt activities and therefore a direct cost.

 

What is Import VAT?

Where you bring goods into the KSA from overseas, those goods are subject to import VAT at the first point of entry into that destination country. The rate of VAT due at import will be the same as would apply were the goods supplied within the GCC country of import.

Import VAT is normally recoverable provided you are registered for VAT and hold the necessary import documentation to support claims for deduction or refund of VAT.

 

What is a B2C Consumer?

For the purpose of these FAQ’s, we consider that a B2C consumer is a person who is not registered or liable to be registered for VAT.

These may include private individuals, public bodies, charities and businesses that are not registered because their turnover is below the VAT registration threshold or those activities are entirely exempt from VAT.

 

What is a B2B Customer?

For the purposes of these FAQ’s, a business customer is a legal or natural person VAT registered, making purchases of goods and services for the purposes of carrying on a taxable business.

For the purposes of these FAQ’s, we have taken for granted that a B2B customer is able to provide with his VAT registration number.

 

What do we mean by prices inclusive of VAT

All the prices published in the Souq.com webpage must include the amount of any applicable VAT.

 

Will all the categories of goods charged with 5%?

VAT will be imposed on most domestic supplies of goods and services in KSA at a standard rate of 5% with few exemptions and zero-ratings.

VAT will be charged at 0% in respect of the following main categories of supplies in the KSA:

  • Export of goods outside the KSA.
  • Services provided to non-GCC residents.
  • Transportation services for Goods or passengers outside KSA and related supplies.
  • The first supply of investment metals by its producer.
  • Medicines and medical equipment.

 

How can I get myself registered for VAT?

In order to register for VAT, businesses must first be registered at GAZT for Zakat and Income Tax.

Some large companies, particularly those already registered for other forms of tax in KSA are auto-registered for VAT by GAZT. If this applies to your business, you will receive a notification from GAZT notifying you of this.

If your company is not auto-registered, you can register online on the following link:
https://login.gazt.gov.sa/irj/portal?ume.logon.locale=en&login=X

The Registration form will require you to specify:

  • Whether you are an importer
  • Whether you are 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)

 

Benefits of getting VAT registration as a business?

As a VAT registered business you will be obliged to charge VAT to your customers in connection with your supplies of goods or services, but you may be entitled to deduct input VAT, so that any VAT charged by your suppliers does not become a cost in your supply chain.

 

I have obtained my VAT Registration certificate on xxx date. Can I claim my VAT input tax preregistration?

You may be entitled to deduct Input VAT incurred in respect of purchases of goods or services before the effective date of registration, provided that the conditions listed in the Article 49 (points 2 and 3) of the KSA VAT Implementing Regulations are met.

 

How can I update my VAT number?

You can enter your information relating to VAT on the selling center here

 

How will VAT be calculated on the commission and other service revenue from Souq?

The introduction of VAT will impact on the total amount of the commission charged by Souq.com to your business, which will include VAT at a rate of 5% from 1 January 2018.

The commission will be charged over the VAT exclusive prices displayed by the VAT Registered Marketplace sellers on Souq.com webpage. For non-VAT registered Marketplace sellers, the commission will be charged over the final price displayed on Souq.com webpage.

 

How can I get my tax Invoice?

The electronic invoices in connection with the commission fee charged by Souq.com will be available in your log in account through the Orders tab.

 

Who will be responsible of issuing Tax Invoice to the customer?

As a seller on Souq.com, it is your responsibility to comply with the VAT Legislation at all times. This includes issuing valid tax invoices on sales made to customers (where necessary), collecting VAT (if applicable) and payment of VAT to the KSA General Authority of Zakat & Tax (GAZT).

 

How will I know if I have to issue Tax Invoice to my customers?

If you are registered for VAT, for any goods or services supplied after 1 January 2018, you will be required to issue a valid tax invoice. The particulars to be contained a tax invoice are specified in the Article (53.5) of the KSA VAT Implementing Regulations of KSA.

 

How can my customers ask for a tax Invoice? Will Souq.com providing them with the Contact Us information or is there any support center for facilitating these queries?

Upon the delivery of the order, as a seller, you should expect a request from the customer to submit a Tax Invoice through the Financials tab.

In any case, as a seller on Souq.com, it is your responsibility to comply with the VAT Law at all times. This includes issuing valid tax invoices on sales made to customers (where necessary), collecting VAT (if applicable) and payment of VAT to the KSA General Authority of Zakat & Tax (GAZT).

 

What should I do in case of return orders?

In case of return orders, VAT will need to be refunded to the customer by way of a Tax credit note. It is an obligation of the Marketplace Seller to provide the customers with a valid Tax credit note.

Upon the return order, you should expect a request from the customer to provide with a valid Tax Credit Note through the Financials tab.

 

Read the KSA Sellers VAT Help Page

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