GCC Indirect Tax Weekly Digest

KSA GAZT and SAMA sign Memorandum of Understanding on e-invoicing

The Kingdom of Saudi Arabia (KSA) General Authority of Zakat and Tax (GAZT) issued a press release stating that it has signed a Memorandum of Understanding with the Saudi Arabian Monetary Agency (SAMA) to encourage corporate and government entities to implement e-invoicing through the ESAL platform.

The new platform is being introduced in order to increase transparency around invoicing, and to prevent tax evasion. GAZT expects the ESAL platform to greatly reduce the time and expenditure necessary to comply with GAZT’s regulatory requirements for issuing and retaining tax invoices.  The practical effects for taxpayers in future is likely to depend on the developing use of the platform within each sector.

The ESAL platform was originally launched by SAMA in May to facilitate payment for transactions between government agencies and the businesses that act as suppliers. The new agreement with GAZT indicates that the Saudi government is actively seeking new ways to integrate its VAT systems with other relevant government mechanisms in order to increase efficiency.

The launch of the ESAL platform does not in itself entail a mandatory legal requirement for Saudi businesses.  However, businesses should note that the existing VAT Implementing Regulations contain a requirement for Tax Invoices to be issued in an electronic format in cases where this is prescribed in future Regulations issued by the Minister of Finance or GAZT.

Currently, there are no such Regulations that mandate the issuance of electronic invoices by taxpayers for VAT purposes.  However, the Memorandum of Understanding between SAMA and GAZT indicates that the use of electronic invoicing is being encouraged as part of the regulatory framework in the KSA, and it may therefore be that mandatory requirements for electronic tax invoices for VAT purposes could be seen in future.  

Where businesses are not able to issue e-invoices through the ESAL platform, we would recommend for businesses to consider the potential implications of an electronic invoicing requirement for future budgeting and planning purposes.

GAZT and Saudi Ministry of Housing clarify VAT treatment of first home for Saudi citizens

In KSA, the Ministry of Housing and the General Authority of Zakat and Tax have issued a joint statement clarifying the practical operation of the Royal decree providing for the State to bear the VAT on the first home of citizens.

The certificate is obtained by the person seeking to purchase their first home.  The steps for the citizen to obtain the certificate and make use of the Royal decree can be summarized as follows:

• The eligible citizen registers on the Ministry of Housing's system here. After the citizen registers and submits an application to obtain the electronic certificate, the Ministry issues the certificate to the citizen to be provided to the supplier in order to purchase the first home without paying VAT.
• The supplier then submits an application to the Ministry of Housing requesting payment of the VAT here. After the Ministry reviews the supplier's documents and ensures the validity of the supply, the Ministry pays the due VAT to the supplier, up to a maximum of 42,500 riyals (aligning with the maximum house purchase price of 850,000 riyals specified by the Royal Decree). The supplier must declare the full value of the VAT due on the supply in the VAT return, and pay the Output VAT to GAZT.

Please note that this digest is for information purposes only and should not be construed as an advice. It does not necessarily cover every aspect of the topics with which it deals. You should not act upon the contents of this alert without receiving formal advice on your particular circumstances.