VAT refund procedure in the GCC Region: Kingdom of Saudi Arabia

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published on 13 October 2022 | reading time approx. 2 minutes


As mentioned in Part I of our article series, these articles serve to inform our readers about VAT refund mechanisms in the GCC region. Analogous to Section 18 (9) of the German Value Added Tax Act, it is also possible for foreign companies in the GCC region to obtain a refund of VAT paid.
 


Part II is intended to present the VAT refund procedure of the Kingdom of Saudi Arabia.

  
Since 1 January 2018, taxes have been imposed in Saudi Arabia for the first time (except for consumer taxes). As in most tax systems, the first step was the introduction of VAT. The VAT rate was initially set at 5 percent. On 1 July 2020, the VAT rate was increased to 15 percent. However, Saudi Arabia's Crown Prince Mohammad bin Salman plans to reduce the tax again to a rate of between five and ten percent within the next few years.
 
Foreign companies are entitled to apply for a refund of VAT under Article 67 of the GCC VAT Framework Law, provided that the taxable supplies were obtained within the scope of the company and from a GCC member state.
 
For Saudi Arabia, the mechanism and procedure for submitting claims for refunds is as yet unclear. Entitled persons can contact the GAZT to prove their entitlement for refund or alternatively reserve their rights to the refund by submitting a manual application or sending the application along with the proposed/prescribed supporting documents to the GAZT email address.
 
The application for refund of VAT must be submitted to KSA by 30 June following the end of the year in which the VAT was paid. Only those businesses that cumulatively fulfil the following conditions are entitled to apply:
  • The applicant is resident in a country with a VAT-like transaction tax system;
  • The applicant is registered with the relevant tax authority for the purposes of this similar tax;
  • The country in which the applicant is not resident provides a similar tax refund mechanism to KSA residents who are taxed in that country;
  • Proof of incorporation in the country of establishment (e.g. a certificate of incorporation/registration with the relevant authority);
  • Certificate of tax registration with the competent tax authority;
  • The requested refund amount is at least SAR 1,000
 
Provided a company meets all the requirements, it can benefit from the VAT refund procedure, on condition that documents such as invoices, proof of payment, etc. are available.
 
Since the so-called "Electronic Services System" has not yet been introduced in the GCC region, services between GCC states are considered international trade until then, and member states are not yet considered member states for tax purposes.
 
Consequently, businesses based in the GCC region that pay VAT in other Member States should also have their entitlement to a refund of VAT checked.
 
If the application is approved, the payment will be made within 60 days from the date of approval to the specified bank account of the entitled person. We will be happy to assist you in checking whether you are entitled to a refund of VAT and to submit the applications to the Saudi tax authorities on your behalf.

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Luna Yusuf

Tax Advisor

+971 4 2950 020

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