Supply under VAT in Saudi Arabia - FAQs

Is the supply of real estate taxable?

Residential property for the purpose of lease, license or rent is zero-rated.

However, properties used for commercial purposes (hotel accommodation, services, etc.) are taxable at 5%.

How are contracts treated under VAT?

Contracts not anticipating VAT are treated as zero-rated supplies until either the expiry/renewal date of the contract or December 31st 2018 (whichever is earlier). The following conditions must be met:

• The provided contract was signed before May 2017.
• The taxable supplier is entitled to deduct the full input tax for the supply of goods or services or refund of the tax.
• The customer provides a written confirmation to the supplier that the full input tax can be deducted from the supply.

What can I do if there is a change to an existing or ongoing transaction?

If there is a change to an existing transaction, the taxpayer will have to make adjustments to the VAT in any previous invoices. This can happen for the following reasons:

• An order for a good has been paid but cancelled, and the amount has to be refunded.
• A customer opts to cancel a service that has been partially completed. The revenue and tax collected have to be adjusted accordingly.

In these cases, the suppliers must issue credit or debit notes to make corrections for the overstated or understated VAT.

• Credit notes are issued when the supplier has collected excess VAT from the customer.
• Debit notes are issued when the supplier has not collected enough VAT from the customer.

Credit and Debit notes must contain the tax invoice number of the original transaction.

What are credit notes?

Credit notes are issued by the supplier to the customer when the original invoice lists more VAT than is correct for the transaction.

Credit notes must contain the tax invoice number of the original transaction.

What are debit notes?

Debit notes are issued by the supplier to the customer when the original invoice lists less VAT than is correct for the transaction. 

Debit notes must contain the tax invoice number of the original transaction.

What happens if a customer buys goods and pays for them in full, but cancels the order and is refunded the payment amount?

In this case, the supplier of the good(s) must issue a credit note to the customer for the output VAT that was collected with the original payment.

What is Self-supply?

Self-supply refers to transactions in which a taxable business supplies goods or services to itself.

Is self-supply taxable?

No, self-supply is not taxable except in the case of nominal supplies.

What happens if members of a VAT group supply services to each other?

Supplies among the members of a VAT group won’t be treated as taxable supplies.

What if a business supplies goods to itself from another GCC country?

Self-supply can occur from outside the KSA if a taxable business is established in two GCC countries. If a self-supply is made from another GCC country to the KSA, it is treated as an import from the non-Saudi branch’s original supplier and is therefore taxable.

What are the port codes of different ports in the KSA?