June 23, 2024

KPMG: Lower VAT threshold to increase taxpayer base in Saudi Arabia


Riyadh: 20 January 2019 – The reduction of the value-added tax (VAT) registration threshold to SR 375,000 from January 1, 2019, will increase the taxpayer base by 150,000, estimates KPMG Al Fozan & Partners, the leading provider of audit, tax and advisory services in Saudi Arabia

 The Kingdom introduced VAT on January 1, 2018, and currently boasts over 140,000 VAT-registered taxpayers. The relative efficiency with which the General Authority for Zakat and Tax (GAZT) managed the implementation played a significant part in the fairly uneventful adoption,” said Nick Soverall, Head of VAT at KPMG Al Fozan & Partners

“The GAZT is making strides towards improved policy, administrative and auditing capacity in all taxes. The introduction of VAT has given this effort impetus” says Soverall. The GAZT has also issued 24 detailed VAT guides on different topics such as financial services, healthcare, telecommunication, the digital economy and real estate to clarify the law and support taxpayers with compliance.

Non-resident taxpayers are required to appoint a tax representative to act on their behalf and to assume joint liability for VAT debts. This requirement is posing some challenge to some non-resident taxpayers. Hopefully, progress in this area can be made soon.

VAT audits have commenced and assessments issued for contraventions of the regulations such as late registration and filing of VAT returns as well as incorrect declarations.

Soverall advises that business should consider creating a tax strategy, including policies and procedures, to manage tax risk and interaction with stakeholders.  He also suggests the need to use tax technology to aid compliance and analysis. The global trend is towards tax authorities accessing taxpayer data directly and, in some territories, preparing the return for the taxpayer.

“Managing large volumes of data present a financial and tax risk. Therefore, the integration of tax specific technology to optimise tax operations is critical.”

“GAZT is conscious of and taking steps to formalise the processes and operations of the tax function so that the tax team is equipped with the right skills and tools to meet the new challenges ahead,” noted Soverall.

“Our experience in assisting clients with VAT implementation and providing post-implementation support has revealed key insights that point towards a rapid evolution of the management of taxes in the region”.  

“Saudi taxpayers need to be prepared. The Kingdom’s tax authorities are not standing still.”

Soverall expects an increase in the level of scrutiny as GAZT continues to build its resources to challenge the VAT treatment of specific transactions.

In many ways, we are the beginning of the journey in terms of understanding and adapting to, the impact of taxation on all aspects of business. Interesting times lie ahead.



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