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VAT Law Key Differences Between Kingdom of Saudi Arabia (KSA) and United Arab Emirates (UAE)

GST Expert
Author: CA Amlesh Gupta
Posted On: Monday 08 January 2018

Tags: UAE VAT UAE Saudi Arabia Difference in UAE & Saudi VAT KSA VAT

All six members of the Gulf Cooperation Council agreed to introduce VAT. But only UAE and Saudi Arabia are the two GCC countries who have implemented VAT from 1stJanuary, 2018. Both Countries have implemented VAT based on Unified GCC VAT Agreement, but there are number of differences in how they have implemented it. Rest of the GCC Countries will implement VAT late of 2018 or from 2019.

In this article, our focus shall be on the difference between Saudi Arabia VAT Law and United Arab Emirates VAT Law. The key differences between the two nations are as follow:

Sr. No.

Particulars

KSA VAT Law

UAE VAT Law

1

Basis

KSA VAT Law is concise as compare to UAE VAT Law. This is because it incorporates references to unified GCC VAT Agreement.

UAE appears to have adopted a more detailed, standalone VAT law.

2

Meaning of Words and Phrases

Article 1 of KSA Regulations state that Words and phrases contained in these Regulations shall have the meanings ascribed to each of them in the Agreement and the Law unless the context requires otherwise.

However, in case of UAE Law, words and phrases are defined or described in the regulations itself without giving reference to GCC VAT Agreement. There is long list of definitions of words and phrases in regulations.

3

Exempt List

Below are supplies which are exempted from VAT:

1.      Financial Services

2.      Lease or License of Residential Real Estate

Below are supplies which are exempted from VAT:

1.      Financial Services

2.      Residential Buildings*

3.      Bare Land

4.      Local Passenger Transport Services

 

4

Applicability of VAT on Residential Buildings

Sale or Transfer of Residential Building is a taxable event and VAT shall be levied at standard rate i.e. 5%. However, Lease and license of Residential Building is exempted.

Supply of Residential Building is Exempted unless it is zero rated subject to certain conditions.

5

Zero rate List

Below are the supplies which are Zero Rates:

1.      Export of Goods.

2.      Services Provided to Non-GCC Residents.

3.      Transportation services for Goods or passengers outside the Kingdom and Supplies relating to transportation.

4.      Supply of any Qualifying Medicines or Qualifying Medical Goods.

Below are the supplies which are Zero Rates:

1.      Export of Goods & Services

2.      International transportation services for Passengers and Goods

3.      Goods and Services Supplied in Connectionwith Means of Transport.

4.      Goods and Services Supplied in Connection with Means of Transport.

5.      Precious Metals

 

6

Important difference for Zero Rated and Exempted Goods & Services

1.      There is no zero rating on residentials property and only leases are VAT-exempt, while  sales are  subject to the 5% VAT unless a property is to be used as a permanent home.

2.      private healthcare services and the education sector are taxable.  

3.      Local Passenger Transport is taxable.

1.      UAE has offered a zero rating on residential property leases and sales within three years of completion, while any subsequent sale or lease will be exempt from VAT. 

2.      Private health care services and Education Sector (Except higher education) are zero rated.

3.      Local Passenger Transport is Exempt.

7

VAT Return Periodicity

4.      Companies with annual income in excess of 40million must file returns on a monthly basis while other companies must file their returns on a quarterly basis with payments required to be made within a month of the end of the relevant period.

5.      VAT returns will generally be required to be submitted on a quarterly basis depending on the returns and payments due within 28 days after the end of the period.

8

VAT Treatment on Contract Entered prior to VAT Law implementation

contracts that were entered into before May 31 this year and are silent on VAT, the supply can be treated as zero rated until the end of the contract or December 31 2018 where the customer is entitled to deduct input VAT.

Undernormal circumstances, where the contract is silent on VAT, the price will be deemed to be inclusive of VAT. However, where the contract was concluded prior to the implementation date and a part of the supply is made after the implementation date, suppliers will be able to charge the tax to the customer where the latter is able to recover it.

9

Adjustment under capital asset scheme period

The adjustment period in respect of which adjustment  under this article is required  is 6 years in respect  of moveable  tangible  or intangible capital assets  and 10 years  in respect of immovable capital asset

A Capital Asset eligible for the Capital Asset Scheme shall be monitored and the Input Tax incurred shall be adjusted, as required in accordance with the provisions of this Article, over a period of either 10 consecutive years for buildings or parts thereof or 5 consecutive years for other Capital Assets,

Reach out on  "Whatsapp Support for Saudi VAT on +96 6547300622"   or Email  us on  amlesh@apmh.in for any further queries on the above blog.

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