Saudi Arabia: Guidance on VAT treatment of existing contracts

published on 3 June 2020 | reading time approx. 2 minutes

In the meanwhile, the authority of the Kingdom of Saudi Arabia has published guidance on the VAT treatment of existing/long-term contracts. The guidance unfortunately is not 100 per cent clear at this stage; however, our understanding of the guidance so far is reflected below. We assume that within the next couple of weeks we can clarify things more in detail. Please note the below summary is for information purposes only and does not replace professional tax advisory on concrete matters. Hence, tax advice is highly recommended in order to be compliant with the tax regime

In general, the authority distinguishes between contracts entered into with a government entity as recipient of supplies and contracts which have been entered into with a private recipient of supplies.

Contracts between private suppliers and governmental entities »
Contracts between private entities »

Contracts between private suppliers and governmental entities

Contracts which have been signed prior to 11th of May 2020:

These contracts will generally be subject to 5 per cent VAT if the contract has already been partially executed before 1st of July 2020 – until the expiry of the contract or its renewal or 30th of June 2021. Beyond this date, signed contracts will be subject to 15 per cent VAT.

Contracts signed on or after 11th of May 2020 – 30th of June 2020:

These contracts will be subject to 5 per cent VAT if the supply has been completed before or on 30th of June 2020.

Contracts signed on or after 1st of July 2020:

These contracts will be subject to 15 per cent VAT.

Contracts between private entities

Contracts which have been signed prior to 11th of May 2020:

These contracts will generally be subject to 5 per cent of VAT if the contract has already been partially executed before 1st of July 2020 and the customer is entitled to input tax deduction – until the expiry of the contract or its renewal or 30th of June 2021. Beyond this date, signed contracts will be subject to 15 per cent VAT.

Contracts signed on or after 11th of May 2020 – 30th of June 2020: