The General Authority for Zakat and Income Tax (GAZT) denied that money transfer amounts in the Kingdom are subject to VAT, confirming that they are included in the list of exemptions in the financial services sector, and clarified in a statement yesterday that the added tax is calculated only on transfer fees at 5%, and is paid by the person transferring the money.
The General Authority for Zakat and Income Tax (GAZT) said in a statement yesterday.
Exemption of interest on loans or lending fees
The executive regulations of the VAT system specified a number of tax-exempt activities in the financial sector, which include a number of types of transactions and services, such as interest on loans or lending fees with an implicit profit margin, including loans, credit cards, mortgages, leasing financing, securities transactions, in addition to current, deposit and savings accounts.
Exemption of insurance or reinsurance contracts
VAT Refund The General Authority for Zakat and Income Tax (GAZT) has invited all establishments to register for VAT through the website.
It is worth noting that the implementation of VAT in Saudi Arabia will begin on January 1, 2018, as part of the unified VAT agreement of the Cooperation Council for the Gulf States.
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, are also exempted.
According to Article 29 of the Executive Regulations, cases where the consideration payable for the financial service has been explicitly paid as a fee, commission or commercial discount are excluded from the exemption. The regulations clarify the cases that are taxable at 5%, taxable at zero rate, exempted, or outside the scope of the tax, so that Establishments engaged in a taxable economic activity are entitled to recover the amount of VAT paid on their taxable inputs that are only related to activities taxed at 5% or zero-rated, while establishments engaged in an exempt economic activity are not entitled to recover the amount of VAT paid on their taxable inputs.
Exempt Activities in the Financial Services Sector.
1- 1- Money Transfer Amounts.
2- Margin-based financial products.
3- Operating checking, deposit and savings accounts.
4. Insurance and life reinsurance services.
<5- Interest or borrowing fees charged with implicit profit margins for any form of lending including credit cards.
6- Interest or borrowing fees charged at an implicit profit margin for financing, including leasing financing.
<7- The issuance or transfer of debt securities and securities.
The General Authority for Zakat and Income Tax (GAZT) has invited all establishments to register for VAT through the website, which is characterized by providing a wide range of tools and information that is a supportive reference for establishments to achieve readiness, in addition to visual guidance materials, and all general and technical information and FAQs that cover aspects of the registration process and readiness to apply the tax.
