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Saudi Arabia: VAT rate increase, transitional provisions

Saudi Arabia: VAT rate increase, transitional provision

The Ministry of Finance earlier in May 2020 announced an increase to the value added tax (VAT) rate, to counter the economic implications of the coronavirus (COVID-19) pandemic.

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The new VAT rate will be effective 1 July 2020. Read TaxNewsFlash

The Saudi tax authority (General Authority of Zakat and Tax) on 20 May 2020 announced guidelines concerning transitional provisions that will apply to contracts signed and tax invoices issued before the effective date of the new VAT rate. The transitional guidance is summarized, as follows:


Contracts signed with government entities

  • Before 11 May 2020—the 5% rate will apply until the date of expiration or renewal of the contract, or until 30 June 2021, whichever is earlier.
  • Between 11 May 2020 and 30 June 2020 (inclusive)—the 5% rate will apply on supplies made before 1 July 2020; the 15% rate will apply on supplies made on or after 1 July 2020.


Contracts signed between VAT-registered persons

  • Before 11 May 2020—the 5% rate will apply until the date of expiration or renewal of the contract, or until 30 June 2021, whichever is earlier (the customer must be entitled to deduct input VAT in relation to that supply in full).
  • Between 11 May 2020 and 30 June 2020 (inclusive)—the 5% rate will apply on supplies made before 1 July 2020; the 15% will apply on supplies made on or after 1 July 2020.


Tax invoices issued before 11 May 2020

  • If tax invoices are issued before 11 May 2020 in relation to supplies to be made on or after 1 July 2020, the 5% rate will apply provided that the supply is made before 1 July 2021.
  • Supplies made on or after 1 July 2021 will be subject to the 15% rate. In this situation, the supplier must issue an additional tax invoice for the additional amount of VAT.


Tax invoices issued between 11 May 2020 and 30 June 2020 (inclusive)

  • If tax invoices are issued between 11 May 2020 and 30 June 2020—the 5% rate will apply on supplies made before 1 July 2020.
  • The 15% rate will apply on supplies made on or after 1 July 2020; in this situation, the supplier must issue (at the time of supply) an additional tax invoice for the additional due VAT.


For more information, contact the head of KPMG’s Global Indirect Tax Services:

Lachlan Wolfers | +852 2685 7791| lachlan.wolfers@kpmg.com

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