In depth

Based on our high-level review, we have summarized the key changes below: 

• Article 8(8) places an obligation on the resident taxable person registered with the ZATCA to display its VAT registration certificate at its main workspace, branches and electronic stores so that it is visible to the public. The obligation extends the obligation to display the tax registration certificate to electronic stores.
• Article 9(6) states that economic activity does not include the activity practiced by workers and other persons to the extent that they are contractually bound with the employer or linked to any other link under which the work relationship is established for purposes of registration in accordance with the Law and these Regulations. 
• Article 9(7) is added: The provision contained in Paragraph (6) of this Article applies to the remuneration specified as benefits or wages for workers in contracts for employee secondment services, provided that the following is achieved:
  1. The work relationship between the seconded worker and the customer is established.
  2. The customer is a legal person, or a natural person according to controls issued by a decision of the Governor.
  3. The supplier must be a government agency or a licensed human resources company, or a person who has a permit for secondment of labor services from the competent authority.
  4. The contract, agreement or other contractual documents between the supplier and the customer include an explanation of the value of the wage or benefits of the worker, and the value of the taxable commission in detail. 

The changes to Article 9 attempts to exclude any remuneration paid to third party suppliers of workers where any contract and tax invoices specify the difference between recovery of wages and benefits (remuneration) and any commission / fees charged.

• Article 29(7) has been updated: As an exception to Paragraph (1) of this Article, a financial service that provides or transfers a life insurance contract or a life reinsurance contract is considered an exempted supply, and the exemption includes cases in which the consideration payable for the service has been paid expressly as a fee, commission or trade discount. This appears to limit the exemption to any amount received in exchange for the issuance of a life insurance or reinsurance contract. Any additional fees charged in relation to administrative activities may still be taxable in the KSA.
• Article 40(7)(d): The taxable person shall submit a certificate issued by a licensed and accredited legal accountant in the KSA indicating to write off the debts from the commercial books, and the authority may accept any other supporting documents if the taxable person is not obligated to appoint an auditor as required by the applicable regulations. This is a welcome change for small businesses who may not legally require a statutory audit to be undertaken.
• Article 63(3): As an exception to what is stated in Paragraph (1) of this Article, the taxable person may correct the error that results in a tax difference whose net value is less than 15,000 Riyals by adjusting the net tax in the declaration. The threshold has been increased to reduce the amount of voluntary disclosures required to be submitted by taxpayers for errors having a small impact on net tax due.
• Article 75(5) has been deleted: Any opinion or ruling issued by the authority in accordance with this Article is not binding on the authority or any taxable person in respect of any transaction carried out by the requesting taxable person or any other person. The provisions of this Article shall be without prejudice to the rights of the authority to issue binding decisions and instructions pursuant to Article 52 of the Law. This suggests that going forward the tax rulings issues by the ZATCA to taxpayers will now be binding on both parties.

To speak with us in relation to any of the proposed changes to KSA VAT, or any tax matters or issues more generally, please contact one of the team members below.

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* Content prepared by Legal Advisors in association with Baker & McKenzie Limited.