Saudi Arabia: VAT refund for designated persons

28 April, 2020

In brief

In accordance with the provisions of Articles 70 and 72 of the Implementing Regulations, persons not carrying on economic activities in the Kingdom of Saudi Arabia (‘KSA’) and who have incurred VAT costs during the calendar year of 2019, shall apply for a VAT refund by June 30, 2020. The relevant provisions to the Implementing Regulations can be accessed through the following link:

https://www.vat.gov.sa/sites/default/files/2018-01/20180125.pdf

In detail

Eligibility

A designated person who is not carrying on any economic activity in KSA may be considered as an ‘eligible person’ for the purposes of refunding VAT incurred in KSA.

Further, a non-resident person not carrying on economic activity in KSA, may also apply to be considered as an eligible person if the following conditions are met:

  • If the person is established in a country with a transaction tax system similar to VAT and is registered for that tax
  • Reciprocal arrangement between both countries

In addition to above, Foreign Governments, International Organizations, Diplomatic and Consular Bodies and Mission may also submit an application as prescribed under provisions of Article 70 of the Implementing Regulations. GAZT has already initiated a process to register such persons through Ministry of Foreign Affairs (‘MOFA’) KSA.

Application to be treated as eligible person

As per the Implementing Regulations, designated persons fulfilling the above criteria need to file an application with the General Authority of Zakat and Tax (‘GAZT’) to be considered as ‘eligible persons’ in order to file an application for refund of VAT incurred in KSA.

As of now, there is no formal process/ mechanism stated by GAZT in this respect.

Individual Identification Number

If the application to be considered as an eligible person is accepted, an individual identification number will be issued to such person which needs to be mentioned on all correspondence with the tax authority.

GAZT has prescribed certain information in sub-article 10 of Article 70 which should be mentioned in the refund application to be filed once the person has been granted eligibility status.

Time period

Eligible persons may file a refund application for VAT incurred during the calendar year 2019 and the deadline to file such application is June 30, 2020.

All non-resident persons can only file a refund application after the end of a calendar year.

Other eligible persons (excluding non-residents) may also file a refund application for any quarterly period, however, only one application can be submitted with respect to any quarterly period or calendar year.

Restriction

No refund application will be entertained for an amount of VAT less than SAR 1,000.

VAT incurred on goods and services mentioned under Article 50 of the Implementing Regulations will not be refunded.

In case of approval of the application filed, payment will be made in the designated bank account of the eligible person within 60 days from the issuance of the notification.

The takeaway

All such persons not carrying on any economic activity in KSA should consider whether they are eligible and submit an application for refund before June 30, 2020. Since the mechanism and process are still unclear, such persons may contact GAZT to demonstrate their eligibility for a refund. 

Foreign Governments, International Organizations, Diplomatic and Consular Bodies and Missions should contact GAZT and MOFA to determine/ confirm their status as an ‘eligible person’ and to demonstrate their eligibility for a VAT refund.

Eligible persons may reserve their rights to the refund by filing a manual application or by submitting the application to GAZT’s designated email address.

Follow us