Saudi VAT registration
VAT accounting software for KSA businesses
تسجيل ضريبة القيمة المضافة السعودية
A person who conducts an economic activity independently for generating income, and is registered for VAT and makes taxable supplies of goods and/or services which exceeds the mandatory annual VAT registration threshold of Saudi Arabia Riyals (SAR) 375,000 is required to be registered as a taxable person for VAT purposes.
The law states that on a retrospective and prospective basis one can determine whether or not a person has made taxable supplies that exceed the mandatory registration threshold.
The retrospective test
If, at the end of any given month, a person has made taxable supplies in excess of the mandatory registration threshold in 9 out of the preceding 12-month period they must apply for registration. Where a person is mandatorily registerable under the retrospective test, he must notify the Authority within 30 days of the end of the month in which he exceeded the threshold. The VAT registration will take effect from the first day of the month following notification.
The prospective test
If, at the end of any month, a person reasonably expects to have made relevant taxable supplies in excess of the mandatory registration threshold in that month and the following eleven-month period, they must apply for registration. Where a person is mandatorily registerable under the prospective test, he must notify the Authority no later than 30 days from the end of the first month in which he reasonably expected to exceed the mandatory registration threshold in the next twelve months. The VAT registration will take effect from the start of that first month.
In addition to the above two testes, as a secondary calculation test, there is a 'reasonable expectation' test, which is to be interpreted narrowly – that is, to only include those persons who should expect without reasonable doubt to pass the threshold. Apart from the mandatory registration thresholds, KSA VAT has also kept an option open for voluntary VAT registration. The voluntary registration threshold is set at 50 percent of the mandatory registration threshold. This results in a voluntary registration threshold of SAR 187,500.
Exemptions from Registration
A privilege from compulsory VAT registration shall apply for persons above the threshold whose taxable supplies consist merely of zero-rated supplies.
Registration of Divisions (Branches)
A branch and its head office are considered to be one taxable person for VAT purposes, given that they both form part of the same legal entity. This also applies in case of two branches with different commercial registrations. As such, a branch will not be registered as a taxable person in its own right. As a consequence, a transaction between a branch and its head office both established in the KSA, or between commercial registrations within the same legal entity, would not be considered as a VAT relevant supply.
Registration on an import
A taxable person must provide his Tax Registration Number (TRN) to the Customs Department on an import. The person designated as the importer, in accordance with the provisions of the common customs system, must generally pay tax at the time of import to the Customs Department, but the taxable person can instead apply for authorisation for the payment of tax to be made through the VAT returns. Authorisation will only be granted if the VAT returns are made monthly and all payments in the previous 12 months have been made on time, and the taxpayer can prove its financial stability. The Customs Department will issue a statement to the taxable person each month, showing the value of goods imported.
The law states that on a retrospective and prospective basis one can determine whether or not a person has made taxable supplies that exceed the mandatory registration threshold.
The retrospective test
If, at the end of any given month, a person has made taxable supplies in excess of the mandatory registration threshold in 9 out of the preceding 12-month period they must apply for registration. Where a person is mandatorily registerable under the retrospective test, he must notify the Authority within 30 days of the end of the month in which he exceeded the threshold. The VAT registration will take effect from the first day of the month following notification.
The prospective test
If, at the end of any month, a person reasonably expects to have made relevant taxable supplies in excess of the mandatory registration threshold in that month and the following eleven-month period, they must apply for registration. Where a person is mandatorily registerable under the prospective test, he must notify the Authority no later than 30 days from the end of the first month in which he reasonably expected to exceed the mandatory registration threshold in the next twelve months. The VAT registration will take effect from the start of that first month.
In addition to the above two testes, as a secondary calculation test, there is a 'reasonable expectation' test, which is to be interpreted narrowly – that is, to only include those persons who should expect without reasonable doubt to pass the threshold. Apart from the mandatory registration thresholds, KSA VAT has also kept an option open for voluntary VAT registration. The voluntary registration threshold is set at 50 percent of the mandatory registration threshold. This results in a voluntary registration threshold of SAR 187,500.
Exemptions from Registration
A privilege from compulsory VAT registration shall apply for persons above the threshold whose taxable supplies consist merely of zero-rated supplies.
Registration of Divisions (Branches)
A branch and its head office are considered to be one taxable person for VAT purposes, given that they both form part of the same legal entity. This also applies in case of two branches with different commercial registrations. As such, a branch will not be registered as a taxable person in its own right. As a consequence, a transaction between a branch and its head office both established in the KSA, or between commercial registrations within the same legal entity, would not be considered as a VAT relevant supply.
Registration on an import
A taxable person must provide his Tax Registration Number (TRN) to the Customs Department on an import. The person designated as the importer, in accordance with the provisions of the common customs system, must generally pay tax at the time of import to the Customs Department, but the taxable person can instead apply for authorisation for the payment of tax to be made through the VAT returns. Authorisation will only be granted if the VAT returns are made monthly and all payments in the previous 12 months have been made on time, and the taxpayer can prove its financial stability. The Customs Department will issue a statement to the taxable person each month, showing the value of goods imported.