Saudi Arabia: Amendments to the date of supply rules in the VAT Implementing Regulations
11 October, 2021
In brief
ZATCA Board of Directors approved the amendments related to Article 20 “Date of Supply in specific circumstances” of the VAT Implementing Regulations. These amendments will take effect as of 1 November 2021.
The announcement is published in the official Gazette on 8 October 2021 and can be accessed here.
In detail
The Board of Directors of the Zakat, Tax and Customs Authority (“ZATCA”) on 26/02/1443 AH (corresponding to 3 October 2021) has issued decision no. 21-02-06 approving certain amendments / additions to the provisions of Article 20 “Date of Supply in specific circumstances” of the VAT Implementing Regulations.
The major changes are summarised as follows:
The title of Article 20 is now changed to “date of supply and tax due date in specific circumstances”
The date of supply for continuous supply of services where contract stipulates specific payment terms shall be the earliest of the payment due date, actual payment, or date of issuance of invoice
In case of periodical installments, the wording of “12 months period” has been added to the initial provisions so the date of supply rule in this case would require the taxpayer to account for VAT at least once every 12 consecutive months
Addition of new provisions (parag. 5) related to the special date of supply rules for governmental agencies whereby taxpayers who are engaged in providing supplies to government agencies, according to contracts concluded in line with the government competitions and procurement processes, would be required to account for VAT at the earliest of (i) the date of issuance of payment order or (ii) the date of receipt of payment, to the extent of the amount received
For the last point listed above, ZATCA explicitly states that the new addition does not apply to supplies between a subcontractor and a principal contractor as part of a governmental contract.
ZATCA has also issued a guide to clarify the application of Article 20 and its new amendments which can be accessed here.
In an effort to facilitate taxable persons’ tax compliance and improve their cash flows, the date of supply rules for supplies to governmental agencies as part of procurement contracts shall be the earliest of the issuance of payment order or date of receipt of payment or part thereof and to the extent paid.
The Takeaway
Taxpayers engaged in providing continuous supplies should take note of this important amendment and make the required changes in the process flow/ ERP systems in order to avail cash flow relief. Taxpayers should also confirm the status of eligible contracts with the government in accordance with the KSA government guidelines.
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Chadi Abou Chakra
Middle East Indirect Tax Network Leader, PwC Middle East
Tel: +966 11 211 0400 Ext: 1858
Ebrahim Karolia
Partner, International Tax and M&A Services, PwC Saudi Arabia
Tel: +966 11 211 0400 ext. 1771
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