In a step that supports and pushes the financial and banking sectors in Saudi Arabia, the implementing regulations of the Value Added Tax (VAT) system has defined exempted activities in the financial sector that include many types of transactions and services.
These exempted activities include loans, credit cards, mortgages, finance leases, banknotes or securities transactions, current accounts, deposits and savings accounts. The transfer of funds from the tax has also been exempted and charged to the transfer fees.
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As for the transfer of funds, the executive regulation demonstrated that the amount transferred is not subject to VAT, but is charged with a transfer fee of 5 percent and paid by the person who transfers the money. The regulation specifies taxable cases of 5 percent, subject to tax at zero rated, exempt or outside the scope of the tax.
Entities engaged in economic activity subject to tax shall be entitled to recover the amount of the VAT they paid on their taxable inputs, which are related only to taxable activities by 5 percent or zero rated. Enterprises engaged in exempt economic activities are not entitled to recover the amount of VAT they have paid on their taxable inputs.
The VAT will be applied in the Kingdom on January 1, 2018, as part of the unified VAT in the GCC region.
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The General Authority of Zakat and Tax has invited all entities to register in the VAT through its website. This website provides a wide range of tools and information that are a reference to support these enterprises to ensure their readiness, along with visual aids, all the information, and general and technical FAQs that include aspects of the registration process and the willingness to apply the tax.