VAT For KSA

VAT Services in KSA

Ever since the introduction of VAT in Saudi Arabia, the compliance burden on small businesses has increased manifolds. While big corporations have a dedicated account and finance department to take care of the paperwork related to the VAT in KSA, small businesses lack the necessary resources. Your required expert services for following areas:

VAT registration in KSA
VAT return filing
VAT incorporation and implementation

Any mistake while filing the return or failure to file the VAT return in KSA or deposit the collections on-time can attract penal actions. If you are also a small business owner and are looking for a reliable VAT accountant in the Kingdom of Saudi Arabia, then your quest ends with us. At Aviaan Accounting, we are one of the most renowned VAT consultants in Saudi Arabia in the region and have been helping business owners with their VAT related queries and requirements.

What is VAT in KSA?

VAT or Value Added Tax in Saudi Arabia is a consumption tax that is levied at every stage of selling of products. It is charged from the consumer as VAT is added to the cost of the good starting from its transportation to its final consumption. As per the guidelines of the statutory authorities in the country, every business that is registered under the VAT must file the VAT returns in KSA as well as pay the collections as per the prescribed schedule. Any delay in filing the return or failure to deposit the collected money on time will attract serious penal actions. Moreover, continued failure to comply with the guidelines might lead to revoking of the VAT number as well, rendering the business ineffective.

While you may attempt to assign this work to your in-house accountant, but there are many issues that may come up here. First of all, the cost of having a full-time accountant in KSA might just be too much for your business. Secondly, you do not know if the said person is actually competitive enough to handle your tasks. If he/she makes any mistake, you will have to bear the consequences of it. Lastly, if that person leaves midway, then you might fall behind the scheduled timelines and will then have to bear the penalties. So, you need to have an experienced and reliable partner to help you accomplish these tasks, and that too at a reasonable cost. With Aviaan Accounting by your side, you can bid adieu to all your worries related to VAT return in KSA.

Guidelines to choose Aviaan Accounting as VAT Consultants in KSA 2021

At Aviaan Accounting, we have been working in Saudi Arabia for the last many years, helping business owners with their various accounting and finance related requirements. We have a team of highly experienced accounting professionals as well as chartered accountants to help you with your VAT-related requirements. Our team members will work in close collaboration with your business to make sure that all your VAT returns in KSA and compliance are completed on time. We will check each and every invoice (inward as well as outward) to prepare your VAT returns in Saudi Arabia and will then help you with depositing the collections and filing your returns.

We use the latest software to maintain your accounting records in KSA and prepare your VAT returns, thereby ensuring 100% accuracy based on the information shared with us.

The range of VAT related services in KSA that we offer include: –

Company registration for VAT in KSA
Assessment of VAT impact
Training on VAT
VAT returns filing services in KSA
Assessment of VAT on sales price and profitability
Implementation of VAT compliant Accounting Software
VAT bookkeeping services in KSA to avoid any penalties for VAT non-compliance
Design and implementation of VAT structure

How VAT is impacting different economic sectors in KSA

Update in VAT Regulations in KSA

The VAT rate in KSA has been increased from 5% to 15% by the government due to which companies need to adjust and modify their accounts, invoicing, and financial transactions recording methods accordingly. This VAT rate increase will require businesses to act swiftly to ensure that their systems are ready to charge 15%. Needless to say, it will have a significant impact on taxpayers, consumers, and the economic sectors of KSA. Aviaan Accounting offers specialized VAT services in KSA with a professional team of accountants who are well aware of the VAT changes and their implications on different businesses.

Impact of VAT on Consumers in KSA

It is most likely that the KSA economy will experience price inflation as a result of the VAT rate increase as well as a reduction of spending on luxury items. All companies undertaking exempt activities and unregistered businesses will also feel the impact of the VAT rate increase on their profits. The VAT increase usually causes a short term rise in spending before the increase and a short term decrease after the implementation

Impact of VAT on Tourism Sector in KSA

KSA government exempts certain real estate transactions from VAT as of October 4, 2020. The additional exemptions as would an introduction of a reduced rate or more zero-rating would result in a more complex VAT regime that is costlier to administer, both from a tax authority and business perspective.

Impact of VAT on Real estate Sector in KSA

VAT Exempted Supplies in KSA

Given below are the supplies which are VAT exempted in KSA, and therefore deemed as not eligible for reclaims of input VAT reclaims:

The issue or transfer of money or security for a month
Credit services
Operation of current, deposit, and savings accounts
Financial instruments
Islamic finance products – Sariah compliant
Interest on loans, credit or debit security
Life insurance services
Residential real estate leases services

VAT registration in KSA

Registration for non-residents of KSA: Non-residents of KSA making taxable supplies inside the country are required to register and file VAT returns. This can be done by appointing professional VAT service providing firm in KSA. The tax agent submits VAT returns and makes payments on behalf of the non-resident taxpayer.

Group registration: Under KSA VAT, two or more legal persons can register for VAT as a group using GAZT’s electronic application form. To be eligible to register as a group:

At least 50% ownership or controlling power must be in the hand of same individual or individuals
Members of the group should conduct an economic activity
Group members should be legal residents of KSA

Fulfil the threshold conditions for VAT registration

Impact of VAT on taxpayers in KSA

Taxpayers in Saudi Arabia will have to immediately act to adjust their systems to be able to issue invoices and charge VAT at the new rate.

Short-term VAT Impact: The update in VAT rate would increase cash flow costs and operating costs, particularly for those who are unable to fully recover the VAT they pay on their expenditure.

Long-term VAT Impact: In the long-term, businesses may need to reevaluate and refurbish their structure, contracts, and transaction flow to mitigate the impact of the rate increase.

Impact of VAT on Business visitors in KSA

The higher VAT rate augment the cost for foreign businesses and individuals procuring goods and services in the country. Since foreign visitors are not registered for VAT in KSA, they cannot claim back the VAT, effectively increasing the price by 15%.

Impact of VAT on Cross-border Businesses in KSA

Services provided by Saudi-based companies to the companies residing outside the kingdom are in principle subject to zero VAT. However, exceptions apply and the tax authority looks closely at taxpayers applying the zero rate of VAT. In case the zero rate does not apply to services, the non-resident company cannot get a refund for the VAT incurred. For multinational companies that operate in Saudi, this could increase the cost significantly. These companies may need to change their business workflow mechanism to minimize the impact of the rate increase.

VAT service in KSA offered by Aviaan Accounting

Aviaan accounting offers VAT services to facilitate companies in all VAT processing matters. As a result of the rate increase, the amount of VAT that is managed by the taxpayer on behalf of the government increases significantly on both the input cost and output revenue side.

Getting it wrong can have significant financial impacts. The penalty for under-accounting VAT is 50% of the underpaid amount. With a VAT rate of 15%, this means a potential financial impact of 22.5% of the fee received by the taxpayer.

How the VAT mechanism works in KSA

A registered business in the KSA that procures raw materials for manufacturing a product will pay a VAT on top of the selling price. The seller will collect this VAT and will account for it later to the government.

The tax paid to the seller for the sale of raw materials is called output VAT.
Then the registered business will sell this manufactured product to a consumer, who’ll pay an additional VAT on top of the finished item’s selling price.
The tax paid by the consumer to the registered business for the supply of the product is called input VAT.

Zero-rated VAT supplies in KSA

Certain service and goods are zero-rated by the KSA tax authority:

Exports of goods or services outside the Council Territory
Supplies within customs duty suspension zones
Exports of services
International transport services of goods or passengers
Medical equipment and medicines
Investment in precious metals