Last week, the new increase in the value-added tax began to apply after the amendment approved by the General Authority for Zakat and Income to become 15% instead of 5%, and the official spokesman for the Zakat and Income Authority, Hamoud Al-Harbi, revealed the goods excluded from applying the 15% VAT, indicating that the goods and services excluded according to the local system include: Residential leasing and some financial services that are based on implicit profit margins.

Exclusion of certain goods

He explained that some goods and services have also been excluded, such as international transportation, whether within or outside the GCC, some medicines and medical supplies according to a list issued by the Food and Drug Authority, as well as exporting outside the Kingdom, adding that there is cooperation between the Authority and the Ministry of Commerce to prevent any manipulation of VAT application by traders.

Addressing that there is cooperation between the Authority and the Ministry of Commerce to prevent any manipulation of VAT application by traders.

11 goods and services exempted from tax application

Reports revealed that 11 goods and services are exempt from the application of VAT, as medicines and medical equipment specified by the Ministry of Health and the General Food Authority came on top of these goods and services exempt from the tax, as well as the supply of gold, silver and platinum for investment purposes is exempt from the tax, and the supply of qualified transportation and associated services is exempt from VAT.

Reports revealed that 11 goods and services are exempt from VAT application. <The list of exempted goods and services includes: Services supplied to non-GCC residents, exports to non-GCC countries, issuance and renewal of driver's licenses, rental of residential properties, international transportation of goods and services, sale of personal residential property, current, savings and deposit accounts, and finally issuance and renewal of passports.

The list of exempted goods and services includes.

Sale of residential property from tax

The General Authority for Zakat and Income Tax (GAZT) has clarified that the sale of residential property used by the owner or relatives to a relative up to the fourth degree is not subject to VAT.

The General Authority for Zakat and Income Tax (GAZT)

As for real estate rental contracts, the General Authority for Zakat and Income clarified that if the contract is concluded between two taxable persons before May 11, 2020, the supplier can charge VAT at 5% until the end date of the contract or its renewal or June 30, 2021, whichever is earlier.

The General Authority for Zakat and Income clarified that the sale of residential property used by the owner or relatives to a fourth-degree relative is not subject to VAT.

«Customs» clarifies imported goods tax

For its part, the Saudi Customs Authority clarified the controls for the application of the new increase in VAT on goods imported from abroad, which will be implemented starting from July 1, and explained that «tax invoices issued by a taxable person, registered with the Authority before May 11, 2020, and loaded with 5% tax rate; the new rate of 15% is not applied to it, provided that the actual supply is made before the end of June 30.»

For its part, the Saudi Customs Authority clarified the controls for the application of the new increase in VAT on imported goods from abroad, which will take effect on July 1.

Methods of dealing with tax invoices

The General Authority for Zakat and Income clarified how to deal with tax invoices issued before and after the increase in VAT rate to 15%:

If the tax invoice was issued before May 11, 2020, and the supply related to the invoice is made on or after July 1, 2020, the tax at 5% will apply to that supply, provided that the supply is actually made before the end of June 30, 2021.

Tax invoice from May 11, 2020 to June 30, 2020

If the tax invoice is issued from May 11, 2020, until June 30, 2020.

If the tax invoice is issued from May 11, 2020, until June 30, 2020.

Tax at 5% will apply if the supply is actually made before the end of June 30, 2020

Tax at 5% will apply if the supply is actually made before the end of June 30, 2020

Tax at 15% applies if the actual supply is made on or after July 1, 2020.

Tax at 15% applies if the actual supply is made on or after July 1, 2020.