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Saudi Arabia

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Saudi Arabia Issues Guidelines on Transition to 15% VAT Rate

As previously reported, Saudi Arabia will increase its VAT rate from 5% to 15% with effect from 1 July 2020. For this purpose, the General Authority of Zakat and Tax (GAZT) has provided guidance on the transition rules that will be applied in relation to contracts and invoices for supplies made before and after the 1 July 2020. Given that the increase was initially announced on 11 May 2020, this is used as a reference date for the transition rules.

With respect to contracts for continuous supplies, the rules differ depending on when the contract was entered into:

  • Where a contract was entered into before 11 May 2020, the 5% rate may continue to apply on supplies made under the contract until the earlier of the date the contract expires or is renewed, or 30 June 2021.
  • If the contract was entered into between 11 May and 30 June 2020, the 5% rate applies on supplies made up to 30 June 2020 and the 15% rate applies on the supplies made from 1 July 2020.

With respect to invoices, similar transition rules apply:

  • Where an invoice was issued before 11 May 2020, supplies made on or after 1 July 2020 may be subject to the 5% rate, provided that the supplies are made by 30 June 2021.
  • Where an invoice was issued between 11 May and 30 June 2020, the 5% rate applies on supplies made up to 30 June 2020 and the 15% rate applies on the supplies made from 1 July 2020.

Click the following link for the guidelines, which are currently only available in Arabic.

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