There is no similar provision in other tax legislations that are required to be revised in order to carry out the binding effect.
On 9 July 2023, the General Authority of Zakat and Tax (ZATCA) formally announced its commitment that all tax rulings will be binding advice (view here). It is intended that the binding advice will set out the ZATCA’s opinion about the way in which a relevant tax provision applies to the taxpayer in relation to a specific circumstance. Therefore, it effectively offers a level of certainty and protection accorded by a ruling to the taxpayer.
This announcement is a positive step towards promoting tax certainty for taxpayers in the KSA. A tax ruling application can be an avenue to address any tax ambiguity. However, it is important to monitor the development of this change to better understand the scope and applicability of existing and new tax rulings. Specifically, the key areas to observe include:
- While the ZATCA’s announcement states that the binding effect applies to all rulings relating to all KSA tax legislations, the announcement does not specifically cover the extent of the tax legislation that will be covered under this binding commitment (e.g., Zakat which is currently outside the scope of ruling).
- The announcement does not specifically note the timeline of the binding effect (i.e., whether it will apply retroactively to rulings issued prior to the date of the announcement).
- Generally, a ruling applies for a specified period so long as the law to which it relates remains in force or it may be limited from when it is made until the end of financial year in which it started to apply. It remains unclear which position the ZATCA will adopt.
- It is important for taxpayers to carefully articulate the accuracy and completeness of the circumstances and consider the formation of the questions on which the ruling is seeking. Where material facts were omitted from the ruling application or misleadingly or inaccurately stated, it is possible that the ruling may not bind the ZATCA.
- Where a ruling is obtained by a member of a VAT group or a participant of a joint venture, it is unclear if the ZATCA will be bound by such a ruling in relation to the member entity and the VAT group representative entity if both entities rely on the opinion provided in the ruling.
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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