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Saudi Arabia: Circular on VAT refund to eligible real estate developers

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14 July, 2021

In brief

The Zakat, Tax and Customs Authority (‘ZATCA’, formerly known as GAZT) has issued a Circular No. 2106002 dated 30 June 2021, which illustrates the registration process for real estate developers in order to refund input VAT incurred in relation to exempt real estate activities.

The circular is issued in Arabic language at the moment and can be accessed here.

In detail

Following the terms and conditions listed in the Ministerial Resolution No. 1754 dated 30 November 2020, for considering a licensed real estate developer as an ‘eligible person’, ZATCA through the new circular clarifies the two phases to complete the process as follows:

  • the registration process for real estate developers to become eligible persons; and 

  • the process to file an application for refund of input VAT incurred in relation to exempt real estate activities.

Phase 1 - Registration as an eligible person

The circular referred to the Royal Decree A/84 dated 1 October 2020 and provisions of Article 70(14) of the KSA VAT Implementing Regulations, which allow a real estate developer to register as an ‘eligible person’ in order to refund the input VAT incurred in relation to exempt real estate activities.

Such refund of input VAT is subject to fulfillment of certain conditions listed in the Ministerial Resolution No. 1754 (refer to our previous newsalert for more information on the detailed conditions).

Phase 2 - Submit a VAT refund application

Once ZATCA confirms the eligibility of the person to be a licensed real estate developer,  a VAT refund application can be submitted online. The following should be considered in relation to the said application: 

  • Refund periods are available on a quarterly or on annual basis;

  • Only one refund request needs to be submitted for each quarter or calendar year;

  • The amount of total Input VAT to be reclaimed in each request must not be less than SAR 1,000.

  • No input tax will be refunded for activities undertaken otherwise in the capacity of a license real estate developer or that incurred on items restricted under Article 50 of the KSA VAT Implementing Regulations;

  • Eligible persons have the maximum time limit to submit a refund request within 6 months from the end of calendar year relevant to the claim period in case where no previous requests are made. If the maximum time limit has passed, the eligible person loses the right to refund the Input VAT.

Information to be mentioned in the refund application

The circular provides certain information that need to be included in refund application. These are summarized as follows:

  • The eligible real estate developer must use the VAT refund registration number in all correspondence;

  • For each refund request, name and VAT registration number of the supplier, invoice date, invoice number, total invoice amount, VAT amount  and description of goods or services must be provided;

  • The refund request will include the VAT paid for goods and services for which VAT invoice has been issued and that dated within the refund period;

  • The eligible real estate developer must provide bank account that he wants to receive the refund amount on in case of ZACTA approved the refund request.

Other relevant information

  • The Circular / the KSA VAT Implementing Regulations do not mention a specific period for processing the refund requests.

  • ZATCA has the right to audit requests within a suitable period.

  • ZATCA mentioned that it has the right to request copies of the VAT invoices and related supporting documents to audit the VAT refund application. Such documents must be provided within a period of 20 days. 

  • ZATCA employees can visit the premises to ensure that the eligible real estate developer is in compliant with rules and regulations. 

  • ZATCA should refund the amount of input VAT within 60 days of date of notification (full/ partial approval).

The Takeaway

Taxpayers engaged in real estate exempt activities should take note of the registration process as well as refund application filing mechanism. All the refund applications after obtaining the registration should be filed within the prescribed time frame.

Contact us

Mohammed Yaghmour

Middle East Tax & Legal Services Leader, PwC Middle East

Tel: +966 56 704 9675

Carlos Garcia

Partner, Middle East Customs & International Trade, PwC Middle East

Tel: +971 (0) 4 304 3936

Jeanine Daou

Indirect Tax Leader, PwC Middle East

Tel: +971 (0) 4 304 3744

Ahmed Abdelmaksoud

Senior Manager Customs & International Trade, KSA, PwC Middle East

Tel: +966 56 677 1358

Mohammed Al-Obaidi

Tax Partner, PwC Middle East

Tel: +966 1 465 4240

Yaseen AbuAlkheer

KSA Tax Partner, PwC Middle East

Tel: +966544250540

Fayez Aldebs

Partner in Tax, PwC Middle East

Tel: +966 11 0400

Mugahid Hussein

Partner in Tax, PwC Middle East

Tel: +966 (0)13 849 6311

Fehmi Mounla

Partner, Zakat and Tax, PwC Middle East

Tel: +966 2 610 4400

Chadi Abou Chakra

Partner, Indirect Tax and Fiscal Policy, PwC Middle East

Tel: +966 11 211 0400 Ext: 1858

Ebrahim Karolia

Partner, International Tax and M&A Services, PwC Saudi Arabia

Tel: +966 11 211 0400 ext. 1771

Mohammad Hussein Amawi

Partner, PwC Middle East

Tel: +966 126104400

Mohamed Harby

Partner, PwC Middle East

Tel: +966 56 907 2618

Wael Osman

Tax & Zakat Partner, PwC Middle East

Tel: +966 13 849 6311

Suleman Mulla

Partner, International Tax, PwC Middle East

Tel: +966 54 122 8051

Maher ElAawar

Partner, Middle East Indirect Tax and Fiscal Policy, PwC Middle East

Tel: +971 (0) 56 216 1109

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