Know About Saudi Arabia’s New VAT Exemption for Tourists
As of April 18, tourists visiting Saudi Arabia can now benefit from a refund on the 15% Value Added Tax (VAT) they incur on goods and services during their stay.
This new VAT exemption aims to enhance the tourism experience and was announced by the Zakat Tax and Customs Authority (ZATCA) through amendments to the VAT regulations.
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Key Features of the VAT Exemption
- Zero Percent VAT Rate: Eligible tourist purchases from approved service providers will have a VAT rate of 0%.
- Refund Process: Tourists will be able to claim a refund of the VAT amount paid upon their departure from Saudi Arabia.
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Approved Service Providers
ZATCA will designate specific service providers responsible for managing the tax refund process. These providers will share the responsibility with tourists for any refunds that are improperly claimed.
Guidelines and Implementation
The governor of ZATCA has been authorized to issue guidelines for the tourist VAT refund scheme, which will cover:
- Implementation Process: How the refund process will work.
- Eligibility Criteria: Who qualifies for the tax refund.
- Qualifying Goods: Types of goods eligible for a refund.
- Minimum Purchase Values: The minimum spending required to qualify for a refund.
- Business Requirements: Criteria for businesses to become approved suppliers.
- Application Process: Steps tourists must follow to claim their refunds.
Treatment of GCC Tourists
Until the Electronic Service Law is implemented, tourists from other Gulf Cooperation Council (GCC) countries will be treated similarly to tourists from outside the GCC regarding VAT refunds.
Updates on VAT Regulations
In addition to the VAT exemption for tourists, ZATCA has clarified the process for transferring economic activities.
Key points include:
- Notification Requirement: Businesses transferring operations must notify ZATCA within 30 days of the transfer date unless they have already deregistered for VAT.
- Record Maintenance: Businesses with canceled VAT registrations must keep all necessary invoices and documentation, as deregistration does not eliminate outstanding VAT obligations.
- Tax Compliance on Transfers: If the transfer of economic activity doesn’t meet the required conditions, the goods and services involved will be considered taxable.
This new initiative is part of Saudi Arabia’s broader strategy to enhance its tourism sector and provide a more favorable environment for international visitors.
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