VAT REFUND PROCEDURES IN KSA FOR NON-GCC RESIDENTS: THE LATEST DEVELOPMENTS AND IMPLICATIONS

The Zakat, Tax and Customs Authority (ZATCA) has issued a circular on the procedure for VAT refunds to taxpayers who are not residents in the GCC countries. The circular is applicable to non-resident taxpayers who are engaged in economic activity and are registered for VAT purposes with the competent authority in their country of residence. The taxable person should register and submit a refund application as an eligible person for the refund of VAT incurred on goods and services supplied by a taxable person in the Kingdom of Saudi Arabia (KSA) in accordance with Article 70 of the VAT Implementing Regulations.

ELIGIBILITY VAT REFUND IN KSA

To be eligible for a VAT refund, the non-resident:

• Must be established and registered for tax in a country that applies VAT or a similar tax.
• Must be established in a country that allows reciprocal tax refunds for Saudi residents.
• Must not have a place of business or a fixed establishment in Saudi Arabia or any other GCC Member State.

If the person is eligible for a VAT refund, then the certificate of registration with the country of residence and a registration application should be submitted through ZATCA’s online portal. Detailed steps for online registration and documentation requirements are provided in the circular.
Entertainment and any other goods and services used for a private or non-business purpose are not eligible for the refund of input tax (unless the taxable person supplies those goods or services as taxable supplies) under Article 50 of the VAT Implementing Regulations.
The non-resident must be eligible for a 100% deduction in its own country. If the taxable person is only entitled to a partial deduction of tax due, then the refund is allocated accordingly.

APPLICATION CRITERIA FOR VAT REFUND IN KSA

After registration, the next stage is to submit the refund request by fulfilling the following conditions:

• The tax paid by the non-resident taxpayer is not a result of the supply of goods or services in any GCC member states.
• The tax paid by the non-resident taxpayer is for the purpose of his economic activity relating to the making of taxable supplies.
• The total tax amount for which the application is submitted should be SAR 1,000 or more.
• The application must be submitted electronically through the ZATCA online portal, together with all supporting documents attached. ZATCA has the right to request hard copies of tax invoices or any of other additional supporting documents.
• The supporting tax invoices must be available and meet requirements stipulated in Article 53 of the KSA VAT Executive Regulations, fulfil the provisions of the electronic invoicing regulations, and be supported by proof of payment.

The application for the refund of VAT must be submitted within six months of the end of the period in question. The application must be submitted based on the calendar year and no more than one application for a refund may be submitted for the same period. After processing the application,

ZATCA will issue a decision within 20 days for approved refund applications and will refund the amount within 60 days from the date of issuance of the approval decision.

The ZATCA published a circular on the VAT refund procedure on its official website on 16 February 2023, available in Arabic only.

TAKEAWAY

Although there is a potential long delay for the cashflow of a business, non-residents can now apply to ZATCA for a refund of VAT suffered in KSA. The ZATCA portal only recently became operational and now allows refunds to be processed. The claims can only be made after the end of the calendar year in which the tax was incurred, and we have been advised that the refund is paid within 60 days after the tax authorities agree the claim.
In conclusion, the VAT refund procedures for non-residents outside of the GCC can be a complex process that requires careful attention to detail and adherence to the latest regulations. Our team of experts are well-equipped to assist businesses with navigating the VAT in Saudi Arabia and the VAT refund process and ensuring compliance with all relevant regulations.
For more information regarding how Creation can assist in registering your business and obtaining a VAT refund, contact our Corporoate Structuring and Tax Department via email [email protected] or call Saudi Arabia +966 54 511 2494 UAE +971 4 878 6240.