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Non Resident VAT Registration in KSA

What is VAT?

VAT is a consumption tax imposed on goods and services at each stage of production or distribution, based on the value added to the product or service. In Saudi Arabia, VAT was introduced in 2018 at a standard rate of 5%. It's an important part of the country's taxation system, contributing to government revenue and supporting economic development. For foreign companies operating in a nation where there are taxable operations, Non-Resident VAT Registration is required.

What is Non-Resident VAT Registration?

Businesses located outside Saudi Arabia (KSA) are considered non-residents for VAT purposes. Unlike resident businesses, non-residents making taxable supplies in KSA face specific VAT registration rules.

Who is a Non-Resident for KSA VAT?

A non-resident in KSA VAT is a business lacking a fixed establishment or place of residence within the Kingdom.

Click here to learn about Non-Resident VAT Registration, including eligibility, requirements, and compliance guidelines.

Who Needs to do Non-Resident Registration for VAT? 

The answer is Non-resident businesses. If they make any taxable sales or purchases in the country. Taxable sales refer to selling goods or services that are subject to VAT, while taxable purchases are when a business buys goods or services on which VAT is payable. 

In Saudi Arabia, there are mandatory and voluntary registrations for VAT.

Mandatory Registration: Non-resident businesses must register for VAT if their taxable supplies in Saudi Arabia exceed or are expected to exceed the mandatory registration threshold within 12 months. The mandatory threshold is SAR 375,000.

Voluntary Registration: Even if a non-resident business doesn't meet the mandatory threshold, it can choose to register voluntarily for VAT. This can be beneficial for businesses that want to reclaim VAT on their purchases or present themselves as VAT-registered to boost their credibility. So, now that we understand who needs to register as a non-resident for VAT in Saudi Arabia, let's explore the crucial role that a Tax Representative plays in this process for those businesses.

 

What is the Role of a Tax Representative for Non-Resident Businesses in Saudi Arabia?

If a business from another country wants to work in Saudi Arabia and deal with taxes like VAT, they must have someone called a tax representative in Saudi Arabia. This person helps the business follow the rules and talk to the tax authorities in Saudi Arabia.VAT Registration of Non-Residents is required to fulfill compliance obligations in KSA, including filing VAT returns and maintaining records. 

The tax representative's job includes:

  • Submitting Tax Forms: They fill out and send the necessary tax forms for the business to the Saudi tax authorities.
  • Talking to Tax People: They talk to the tax authorities about anything related to taxes that the business needs to know.
  • Keeping Records: They make sure all the papers and records about taxes for the business are organized and kept properly.
  • Following Rules: They make sure the business follows all the tax laws in Saudi Arabia and pays its taxes on time.

 

To find a tax representative, the business can ask tax advice companies, or lawyers who know about taxes, or get recommendations from other businesses they work with in Saudi Arabia. Having a tax representative helps the business deal with taxes in Saudi Arabia in a way that's easy to understand and follow the rules correctly. Simplify your Saudi Arabian VAT compliance – contact Reyson Badger for expert tax representation and ensure your business navigates the regulations with ease.

 

What are the Key Steps for Non-Resident Businesses to Register for VAT in Saudi Arabia?

VAT Registration for Non-Residents in Saudi Arabia 

Determining Eligibility: 

Non-resident businesses must assess their eligibility for VAT registration in Saudi Arabia. They should engage in business activities in Saudi Arabia that involve taxable supplies. Also, they should not have a fixed establishment or place of residence in the country. 

Appointing a Tax Representative:

Non-resident businesses need to appoint a tax representative who will act on their behalf regarding VAT matters in Saudi Arabia. The tax representative must be authorized by the General Authority of Zakat and Tax (GAZT).

Obtaining a Tax Identification Number (TIN):

The tax representative applies for a Tax Identification Number (TIN) from GAZT on behalf of the non-resident business. This TIN is essential for VAT registration and tax compliance.

Preparing and Submitting VAT Registration Application:

The tax representative prepares the VAT registration application, which includes:

  • Details of the non-resident business (name, address, contact information, etc.).
  • Proof of business activities in Saudi Arabia, such as contracts, invoices, or agreements.
  • An appointment letter authorizing the tax representative to act on behalf of the non-resident business.
  • Copies of passports or identification documents of key personnel involved in the business.

The completed application, along with the required documents, is submitted to GAZT by the tax representative.

Verification and Approval Process:

GAZT reviews the VAT registration application and verifies the information provided. They may conduct additional checks or request further documentation if needed. Once everything is in order and meets the requirements, GAZT approves the VAT registration for the non-resident business.

 

What are the Ongoing Compliance Requirements for Non-Resident Businesses with VAT in KSA?

Compliance Requirement Description Frequency/Timeline Key Considerations for Non-Residents
Filing VAT Returns Submitting periodic reports to ZATCA detailing taxable supplies and any input tax Monthly (if annual taxable supplies > SAR 40 million) or Quarterly (if annual taxable supplies ≤ SAR 40 million). Due within 28 days after the end of the tax period. Must be filed electronically. Accuracy is crucial. Understand your filing frequency. Your tax representative will likely handle this.
Issuing Tax Invoices Providing VAT-compliant invoices for all taxable supplies made in KSA. For every taxable supply made. Ensure all mandatory details are included. Compliance with e-invoicing regulations is essential. Adapt your invoicing system accordingly.
Maintaining Records Keeping thorough and accurate records of all VAT-related transactions. Minimum of six years. Records must be in Arabic and accessible to ZATCA. Your tax representative might maintain these in KSA.
Appointing a Tax Representative Having a ZATCA-authorized representative based in KSA to act on your behalf for VAT matters. Ongoing requirement, generally mandatory. Your tax representative is your primary contact with ZATCA. Choose a reputable one.
Paying VAT Due Remitting any VAT payable to ZATCA as per the filed returns. By the VAT return filing deadline. Ensure timely payments to avoid penalties.
Complying with E-Invoicing Generating and storing invoices electronically following ZATCA's requirements. Ongoing; implemented in phases. Understand the applicable phase and ensure your systems are compliant.
Understanding Reverse Charge Knowing when KSA-based VAT-registered customers are responsible for accounting for VAT. As applicable to specific transactions. Ensure your invoices correctly indicate when reverse charge applies.
Deregistration (If Applicable) Applying to ZATCA to cancel your VAT registration if you cease making taxable supplies in KSA. When you stop making taxable supplies in KSA. Follow the correct deregistration procedures


What are the Penalties for Not Registering for VAT in Saudi Arabia?

  • Enforcement by GAZT: The General Authority of Zakat and Tax (GAZT) ensures businesses comply with Saudi Arabian tax laws.
  • Significant Fines: Failure to register for VAT when required can lead to substantial financial penalties. The amount can be higher depending on the duration of non-registration and the amount of unpaid tax.
  • Back Tax Payments: GAZT may require the business to pay the VAT that should have been collected and remitted during the period of non-registration, creating a significant financial burden.
  • Interest Charges: Late payment of taxes, including those from the period of unregistered operation, can incur additional interest charges.
  • Severe Legal Consequences: Non-compliance with Non-Resident VAT Registration in KSA can result in heavy fines, interest charges, and even legal repercussions.
  • Operational Suspension: In severe cases of non-compliance, GAZT has the authority to halt the business's operations until VAT registration and other issues are resolved.
  • Importance of Compliance: Businesses in Saudi Arabia must be aware of their VAT registration obligations and adhere to the regulations to avoid these penalties.
  • Recommendation for Expert Advice: Seeking guidance from tax professionals and staying updated on tax requirements is crucial for businesses to remain compliant and maintain a positive relationship with tax authorities.

Why Choose Us for Non-Resident VAT Registration?

Reyson Badger has been offering expert and high-caliber VAT registration services in Saudi Arabia. Additionally, our staff assists you in preparing all financial records and statements needed to submit VAT. We will handle the proper and timely preparation and submission of your VAT returns after you have enrolled. To avoid fines or issues, we will make sure you abide by all VAT-related rules and regulations. Regardless of the size of your company, we are here to help you with Saudi Arabian VAT registration and to respond to any of your inquiries.

FAQs

How Can Non-Resident Businesses Get VAT Refunds in KSA?

The General Authority of Zakat and Tax (GAZT) has introduced new guidelines that enable non-resident businesses without a physical presence in Saudi Arabia to claim VAT refunds. This initiative aims to support international trade and investment by providing a mechanism for non-resident businesses to recover VAT incurred on their expenses in KSA. 

Eligibility Criteria for VAT Refunds:

  • The business should be doing most of its work (like selling things or providing services) outside Saudi Arabia.
  • The business shouldn't have any offices or stores in Saudi Arabia. They should mainly operate from outside the country.
  • The refund is for money spent in Saudi Arabia on things directly related to the business's work outside the country. This could be things like travel, hotels, buying goods to sell in other countries, or hiring services.
  • The business needs to follow the tax rules in Saudi Arabia, like filling out tax forms on time and keeping good records of their spending.
  • They have to fill out a form to ask for a refund. This form should explain what they spent money on in Saudi Arabia and show proof of their work outside the country.
  • The tax authority in Saudi Arabia will check the form and the business's records. If everything looks good, they'll give the business back some of the VAT money they paid.

What if my non-resident business only makes a few small sales in KSA? Do I still need to register?

Generally, yes. The mandatory registration requirement for non-residents typically applies even to small amounts of taxable sales.

What kind of activities would require a non-resident business to register for VAT in KSA?

Examples include:

  • Selling goods that are located in Saudi Arabia at the time of supply.
  • Providing services where the place of supply is in Saudi Arabia (e.g., digital services to KSA customers, consultancy performed in KSA).
  • Making taxable purchases within Saudi Arabia.



 

 

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