Saudi Gazette

JEDDAH — Investors in the contracting and real estate sector have been informed to include the 5 percent Value Added Tax (VAT) on all contracts with government departments, said Hamoud Al-Harbi, project manager of VAT at General Authority of Zakat and Tax (GAZT).

Speaking to Saudi Gazette on the sidelines of a VAT workshop, Al-Harbi said that all companies having contracts with government departments need to modify their bills to include the VAT. However, he added that it would be later specified as to which government bodies are exempted from paying VAT. He also added that companies are also required to provide financial reports every three months, failing which will incur fines.

All contracts that were signed without factoring in VAT rate may have zero VAT under three conditions: the contracts must be in effect before May 31, 2017, the customer should be entitled to deduce input tax in respect of the supply of goods and services and finally, the customer provides a written certification to the supplier that input tax can be deducted or refunded in full.

As Al-Harbi told contractors any supplier who issues an invoice or receives consideration before Jan. 1, 2018 but the actual supply of goods or services takes place on or after Jan. 1, 2018 must charge VAT based on the actual date of the supply. Since construction services are a continuous process, then VAT is due at the earlier of the due date or the actual payment and VAT becomes due for each progress payment at the earliest of the issue of the invoice or the date of actual payment.

Al-Harbi also explained the different violating conditions in which companies will be fined. The fines range between SR10,000 to SR100,000. Violations include: not being registered in the VAT, providing fake financial reports, not saving financial documents, not paying the VAT rate and not being cooperative with VAT officials.

However, taxpayers have the right to appeal against decisions of penalties issued by GAZT within 30 days of the date of notification. If taxpayers disagree with the decision issued by the VAT First Instance Committee, an extra 30 days will be given to present an appeal to the VAT Appeals Committee. This committee will issue a decision that shall be final and non-appealable before any other judicial authority.