VAT is implemented in the Kingdom of Saudi Arabia with effect from 1st of Jan 2018. Even the first monthly return was due on 28th of Feb 2018. This being a transactional tax change, it has impacted the way business was done apart from the cash flow and P & L to a great extent.
In our experience, all the implementations of such indirect tax come with a lot of on-going changes with the help of tax rulings. The decree can be passed anytime in many of the aspects and the implementation may be expected from the next day itself. These are clarifications and sometime even change in the procedure or rates to meet the practical situation.
We thought of listing down such ongoing clarifications, press releases and changes and interpret the impact on the businesses due to changes in this write-up.
According to VAT implementing regulations, private sector education services are subject to the standard tax rate of 5%
As Mandated by the Royal Decree No. (A/86) dated 18/4/1439 AH GAZT has announced the mechanism by which the government bears the value added tax (VAT) on behalf of Saudis benefiting from services provided by the private education sector.
GAZT set up a new mechanism in coordination with the Ministry of Education for tax collection. As per the mechanism, private education institutions registered in the VAT system are required to issue tax invoices to Saudi citizens on the amount due for the education services provided to them, but without VAT. The institutions must also confirm the identity of the recipients of the service and include their national identity information on the issued tax invoices to them.
As for the educational services provided to non-Saudis, the institutions are required to issue tax invoices including the 5% VAT, as per VAT law and regulations.
When filing their tax returns through the VAT website, GAZT stated that private sector institutions should enter transactions related to non-Saudi recipients of the services which are subject to the standard 5% rate in the “Local Sales Subject to the Standard Rate” section. Transactions related to Saudis, meanwhile, should be entered in the "Sales to citizens (private health services / private education / first residence)"
Like other sectors, the private education institutions registered with VAT are entitled to deduct the tax due on inputs, as outlined by VAT law and regulations.
GAZT clarified that the unregistered nonresident taxable businesses must apply for VAT within 30days, starting from the date of the first taxable
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