This post is also available in: العربية (Arabic)
VAT is an indirect tax which was imposed for several economic reasons. The main reason was the budget deficit in the Kingdom of Saudi Arabia in the first quarter of this year reached 9 billion dollars! As we all know, our kingdom faced various devastating crises. “Oil prices deteriorated to $ 9 a barrel, the time of prosperity is over, and the time has come to tighten the belts” HRH the Crown Prince said.
How to Sustain the economy?
In 2017, Saudi Arabia moved to impose value added tax on commodities with a standard rate which is 5%. Value Added Tax(VAT) is an indirect tax imposed on all goods and services that are bought and sold by businesses with a few exceptions.The taxable enterprise is merely a mediator between the Zakat & Income Authority and customers. The tax came to cover some short-term deficits whereas it’s an option to diversify sources of income and to ensure the sustainability and quality of the Saudi economy. so that the Kingdom’s economy is among the economies of major countries. In 2020, starting from the 1st of July the government raised the vat percentage from 5% to 15%. VAT is applied in more than 160 countries around the world, and considered as a reliable source of revenue for boosting a country’s budget.
Why do we pay VAT ?
As we all know, the primary duties of a government are to protect the life of its citizens, to improve the quality of life, to maintain the roads and highways and also to defend the country from foreign foes the army and navy have to be kept up. Besides this, not forgetting offering free healthcare and education, all these great public duties need money. VAT helps to build the nation!
The tax is a tool that encourages saving and investment, or even reducing the consumption of certain commodities, and supports exports and economic development. With the passage of time, the tax will have ample monetary proceeds as long as it is compatible with the consumption value and its ease of application on a large scale in various fields.
The minimum set
When the facility or product will be charged for VAT? Registration is compulsory for all people whose annual revenues exceed a certain limit for registration. All the businesses who have a place of residence in the Kingdom and the value of taxable supplies exceeds SAR 375,000 in the preceding 12 months, should mandatorily register under Saudi VAT.
Calculating the VAT
VAT is calculated for the facility through calculating the total sales and purchases. The amounts of the value added tax are refunded for indirect purchases that contribute to the completion of work for the establishment.
People who are subject to VAT are required to file their tax returns and disclose all transactions related to taxable sales and purchases. The returns are submitted to the Zakat and Income Authority on a quarterly basis (three months). for people whose annual taxable supplies do not exceed the value of 40 million SR, and in case if supplies exceed 40 million SR the returns will be filed to the facility on a monthly basis.
Of course, not all businesses and sectors are subject to VAT, there are some exceptions and special cases.As an example; the financial sector is partially exempt, while the residential rental sector is totally exempt. Accordingly, real estate supplies made by way of sale and transfer of ownership or the right to dispose of the property are exempt from the tax. Furthermore, health & education sectors are not subject to tax in case services are provided to Saudi citizens.
Saudi Arabia has prohibited the imposition of tax on many products. Unfortunately, many consumers are ignorant of it, and some merchants have exploited it for their own benefit. Consumers should be more aware and make sure of the prices of each product.
Additionally, the price of the product on the shelf must include the value of
the added tax.It’s not permitted to increase the price of commodities while issuing the invoice under the pretext of VAT
E-Billing a Better Future
Nowadays, the technology revolution is giving us many options for managing our lives and finances. E-billing, short for electronic billing, it’s the process of paying and receiving bills online. As a result of the digital transformation that the world is facing, our wise government has allowed issuing e-bills automatically…
Since electronic invoices simplify the financing process; we made it easy for our Customers. As an example, our Customers enterprise invoices are issued electronically after the request is sent from the application.
Even if your business has grown and the number of requests increases, one day you will need to disclose transactions. ِE-billing makes it easier for you to submit the declaration to the Zakat and Income Authority. Focus on your business and forget about hard copy invoices ! Switch to a modern, environment friendly and efficient way of receiving documents.