The executive regulation of the VAT system details tax-exempt activities in the financial sector that include many types of transactions and services, such as:
Interest on loans or lending fees charged with an implicit profit margin.
Interest on loans or lending fees with an implicit profit margin, including loans, credit cards, mortgages, lease financing, securities transactions, as well as checking, deposit and savings accounts.
Interest on loans or lending fees
Life insurance or life reinsurance contracts, which according to the executive regulations means any conventional, takaful or Islamic insurance contract offered by a licensed provider in the Kingdom that results in a conditional payment in the event of death or a life-affecting event, or any similar contract offered by a non-resident supplier.
Life insurance or life reinsurance contracts.
Commercial fees and commissions: According to Article 29 of the Executive Regulations, cases where the consideration payable for the financial service has been explicitly paid as a commercial fee, commission or discount are excluded from the exemption.
Money Transfer, the Executive Regulation clarifies that the amount transferred is not subject to VAT, but is charged at 5% on money transfer fees, paid by the person transferring the money. The Regulation clarifies the cases subject to VAT.
The regulation clarifies the cases that are taxable at 5%, taxable at zero rate, exempt, or outside the scope of the tax, so that establishments engaged in a taxable economic activity are entitled to recover the amount of VAT they paid on their taxable inputs that are only related to activities taxed at 5% or zero rate, while establishments engaged in an exempt economic activity are not entitled to recover the amount of VAT they paid on their taxable inputs. The regulation clarifies that the amount of VAT transferred is not subject to VAT, but is charged on the 5% money transfer fee and is paid by the person who transfers the funds.
It is worth noting that VAT will be implemented in Saudi Arabia on January 1, 2018, as part of the unified VAT agreement of the Cooperation Council for the Arab States of the Gulf (GCC).
The General Authority for Zakat and Income Tax (GAZT) has invited all establishments to register for VAT through the VAT.GOV.SA website, which is characterized by providing a wide range of tools and information that is a supportive reference for establishments to achieve their readiness, in addition to visual guidance materials, and all general and technical information and FAQs covering aspects of the registration process and readiness for the implementation of the tax. The General Authority for Zakat and Income Tax (GAZT) has invited all establishments to register for VAT through the VAT.GOV.SA website.
