By Innovation-sa on January 8, 2018 in News

The General Authority of Zakat and Tax (GAZT) announced that all lease-to-own and rent-to-own (Ijara) contracts of assets like real estate or cars concluded before January 1, 2018 will not be liable to pay Value Added Tax (VAT).

GAZT clarified that such contracts are viewed as non-continuous supplies and therefore VAT will not be collected for these contracts on the remaining installments after January 1, 2018. However, those signed after January 1, 2018 will be subject to the standard 5 percent VAT.

The GCC unified agreement for VAT, the VAT law and implementing regulations specifies that tax must be imposed only on the value of the underlying assets and any profit or benefit gained from the contract will be exempted from VAT.

According to the implementing regulations of VAT, several activities in the financial sector like interest on loans or lending fees charged with an implicit profit margin, including loans and credit cards, mortgages, finance leases, banknotes or financial security transactions, current accounts, deposit and savings account are exempted from VAT.

In a related note, Saudi Food and Drug Authority (FDA) informed that human medicines, vitamins, and registered medical devices and products will be free from VAT. Abdul Rahman Al-Sultan, director of SFDA’s department of pharmaceutical information and awareness, urged consumers to inform GAZT on 19993 or through “VAT” application any establishment that does not adhere to the VAT policy. The details of medicines and medical products exempted from VAT are available at and the list of medical devices excluded from VAT is available at