Saudi Arabia Zero Rated Vat Supplies
VAT Invoicing, accounting and returns filing software for KSA
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Let’s remove the jargon and help you understand what zero rated supplies mean. All supplies that are subjected to a VAT of 0% are termed as Zero rated supplies. While the supply of zero rated goods or services doesn’t result in VAT collection for the authorities but still any VAT paid by a business for procuring raw material or expenses incurred on any kind of service that can be credited as a cost can be recovered as input VAT.
Here is a simple list of sectors where Saudi Arabia has allowed zero-rated supplies:
- Food supply:
Sale of food items that are provided under an integrated list of commodities to be ratified by the Financial and Economic Cooperation Committee will be zero rated.
- Medical equipment and medicines:
Medicines as well as medical equipment are zero rated subject to controls imposed by the Health Committee.
The sales/supply of all qualifying medicines and medical goods is zero-rated where the dispensing is carried out by an authorized pharmacist or a person who is a distributor has been authorized by Saudi Food and Drug to supply such medical products.
The list of qualifying medicines is provided by the Ministry of Health.
- Metals for investment:
Gold, silver and platinum, which are supplied for investment purposes would attract a 0% VAT. These metals however have to be in purest form, the expected purity level minimum 99%. In addition, the metals must be tradeable on a Bullion Exchange across the globe.
Right from the first supply by the producers these metals would be treated under the zero-rated goods category.
- Local transport:
Passenger transportation service would attract a 0% VAT, provided the transport service is offered by a qualifying means of transport or a scheduled passenger flight or voyage which runs according to a published timetable.
The following rule applies to the transporting vehicle to qualify for the 0% VAT i.e., the transporting vehicles should be able to carry at least 10 persons and must be primarily used for international transport i.e., outside Saudi.
Transport of any kind of luggage including but not limited to pets, cabins, bicycles etc., would be zero-rated
Also, any expense incurred on maintaining the vehicle are also zero-rated.
- Exports of goods
Currently any supply made outside Saudi is an export and attracts 0% VAT. This many change once all the GCC nations implement VAT and when that happens the supply of goods from the KSA to outside GCC Member States would be treated as zero-rated.
- Service provided to a non-resident person
Services provided to foreigner irrespective of place of supply, will attract 0% VAT. As of now, anyone who is not a Saudi citizen is treated as a foreigner, however this will change once VAT is implemented across all the GCC member nations and when that happens a foreigner will be the one who is not resident of any of the 6 nations.
- Persons having Special Status
Charities, organisations run by government, farmers and fishermen need not register for VAT and when these entities or individuals make a purchase they should not be charged with VAT. Also, the very first supply of newly constructed residential real estate is taxed at zero rate. By any chance, if a supply falls into a category for both exempted and zero-rated, the zero-rated treatment shall prevail, which is a great benefit for any supplier as an input can be claimed for creditable VAT paid of purchases.
Here is a simple list of sectors where Saudi Arabia has allowed zero-rated supplies:
- Food supply:
Sale of food items that are provided under an integrated list of commodities to be ratified by the Financial and Economic Cooperation Committee will be zero rated.
- Medical equipment and medicines:
Medicines as well as medical equipment are zero rated subject to controls imposed by the Health Committee.
The sales/supply of all qualifying medicines and medical goods is zero-rated where the dispensing is carried out by an authorized pharmacist or a person who is a distributor has been authorized by Saudi Food and Drug to supply such medical products.
The list of qualifying medicines is provided by the Ministry of Health.
- Metals for investment:
Gold, silver and platinum, which are supplied for investment purposes would attract a 0% VAT. These metals however have to be in purest form, the expected purity level minimum 99%. In addition, the metals must be tradeable on a Bullion Exchange across the globe.
Right from the first supply by the producers these metals would be treated under the zero-rated goods category.
- Local transport:
Passenger transportation service would attract a 0% VAT, provided the transport service is offered by a qualifying means of transport or a scheduled passenger flight or voyage which runs according to a published timetable.
The following rule applies to the transporting vehicle to qualify for the 0% VAT i.e., the transporting vehicles should be able to carry at least 10 persons and must be primarily used for international transport i.e., outside Saudi.
Transport of any kind of luggage including but not limited to pets, cabins, bicycles etc., would be zero-rated
Also, any expense incurred on maintaining the vehicle are also zero-rated.
- Exports of goods
Currently any supply made outside Saudi is an export and attracts 0% VAT. This many change once all the GCC nations implement VAT and when that happens the supply of goods from the KSA to outside GCC Member States would be treated as zero-rated.
- Service provided to a non-resident person
Services provided to foreigner irrespective of place of supply, will attract 0% VAT. As of now, anyone who is not a Saudi citizen is treated as a foreigner, however this will change once VAT is implemented across all the GCC member nations and when that happens a foreigner will be the one who is not resident of any of the 6 nations.
- Persons having Special Status
Charities, organisations run by government, farmers and fishermen need not register for VAT and when these entities or individuals make a purchase they should not be charged with VAT. Also, the very first supply of newly constructed residential real estate is taxed at zero rate. By any chance, if a supply falls into a category for both exempted and zero-rated, the zero-rated treatment shall prevail, which is a great benefit for any supplier as an input can be claimed for creditable VAT paid of purchases.