Everything You Need to Know about Advance Payments in Saudi Arabia

How are advance payments treated in VAT?

Advance payments received against a supply of goods or services are subject to VAT, provided the supply is taxable. The supplier must raise an invoice for the value of the advance payments.

How are security deposits treated in VAT?

For a deposit to be treated as a security deposit, it must not be applied toward the cost of goods or services. A true security deposit will not be subject to VAT and does not require an invoice. A deposit which will be applied toward the cost of goods or services is not considered a security deposit, and will be subject to VAT.

I received advance payments before January 1, 2018. How will they be treated under VAT?

If advance payments were received before January 1, 2018 but the supply of goods or services took place after January 1, the payment is treated as though it was made on the actual supply date of the goods or services.