In Chapter 5 of its implementing regulations governing the value-added tax—which is devoted to exempt supplies—the Zakat and Income Authority has stipulated that residential real estate intended for permanent residence is exempt from the tax, whether the property is supplied for the purpose of leasing or licensing.

Article 29 of the regulations clarifies that the exemption includes specific financial services such as loans and housing finance, credit cards, international passenger transportation, and goods, in addition to the supply of medicines and medical equipment, and the supply of metals.

The regulation further specifies that a number of cash transactions are exempt from tax, such as the issuance, transfer, or receipt of cash, financial instruments, banknotes, or payment orders, the provision of any credit or credit guarantee, and the operation of any checking account, deposit account, or savings account, as well as financial instruments such as debt swaps and futures contracts.

The regulation imposed an indirect tax on all supplies of goods and services made by any taxable person in the Kingdom, specifying that supplies are considered taxable whenever they occur in the Kingdom or are received by a person in the Kingdom, and they were subject to the reverse charge mechanism.

The regulation included several supplies subject to a zero tax rate, namely goods exported from the Kingdom to a location outside the territory of the Gulf Cooperation Council (GCC) states; in which case the supplier of such goods must retain evidence that the goods were transported out of the GCC territory within 90 days of the supply.

It should be noted that value-added tax (VAT) is levied on the difference between the cost price and the selling price of a product. It is an indirect tax imposed on all goods and services except those specifically exempted by decree, and its implementation is scheduled to begin at the start of next year.