By Innovation-sa on December 14, 2017 in News

The General Authority of Zakat and Tax (GAZT) announced that all e-commerce businesses in Saudi Arabia will be subject to 5 percent Value Added Tax (VAT) with its implementation from January 1, 2018.

At present Saudi Arabia have 11.1 million e-commerce users which are expected to grow by 6 million in 2020.

All online sales and purchases will be subject to VAT and the due amount will be collected by the Customs Authority at the port of entry.

Goods imported from GCC member countries will also be subject to VAT as a transitional provision until the implementation of intra-GCC electronic service system.

Specific rules will be applied to electronic services such as e-subscriptions, e-content, software and mobile phone applications that determine how VAT is applied to them.

GAZT said that if the supply is a product or service coming from outside Saudi Arabia, then the recipient in the Kingdom, if eligible for VAT, should calculate the due VAT using reverse charge mechanism.

If the recipient is the end consumer as well, then regardless of the supply volume, the non-resident supplier must register in Saudi Arabia for VAT purposes.

GAZT clarified that electronic portals that serve as intermediary for non-resident suppliers are themselves responsible for calculating the due VAT, rather than the non-resident suppliers acting on their behalf.

In a related note, GAZT announced 5 percent VAT on all private healthcare services. However, medicines and medical equipment approved by Ministry of Health and the Saudi Food and Drug Authority (SFDA) will not be subject to VAT.

GAZT called all eligible businesses to prepare for VAT which will be implemented on January 1, 2018, and advised them to visit VAT official website for further details.