As part of GAZT’s plans and awareness programs for establishments in various sectors, and in order to facilitate their compliance with VAT requirements; The General Authority of Zakat & Tax (GAZT) organized a workshop on Value Added Tax (VAT) for e-commerce shops in Riyadh, in preperation for its implementation on January 1st, 2018.

GAZT clarified that electronic sales and purchases are subject to the 5% VAT, and that the customs will be collecting taxes as goods enter the Kingdom through borders.

GAZT also confirmed that: as a temporary measure, imported goods from GCC countries will be included in the VAT until the activation of electronic tax service systems between GCC countries. E-services such as software, e-subscriptions, mobile applications and digital content will be governed by special laws that determine how VAT is applied to online services.

The General Authority for Zakat and Tax stated that if the supply is an external service, the recipient inside the Kingdom must calculate the tax according to the reverse commissioning mechanism if he/she is a person entitled to tax. Reverse commission is a process where recipients of taxable services calculate the VAT instead of the non-resident supplier.

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

The Zakat and Income Tax Authority has requested all qualified entities to be fully prepared to apply the tax on January 1st, 2018. GAZT also recommends visiting the website (VAT.GOV.SA), which contains a simplified guide on what enterprises need in order to apply the VAT. The website also contains a wide range of tools and information that serve as a reference to support facilities.

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