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Implementation of VAT in the Kingdom of Saudi Arabia - FAQs

VAT Basics
What is Value added Tax?
Value Added Tax (or VAT) is an indirect tax which is imposed on all goods and services that are
bought and sold by businesses, with a few exceptions. VAT is used in more than 160 countries around
the world as a reliable source of revenue for state budgets.

Is VAT being introduced in Saudi Arabia?


Following the agreement in June 2016 of the GCC countries to impose VAT across the GCC region,
Saudi Arabia will be imposing VAT with effect from January 1, 2018, at a standard rate of 5%.

The General Authority of Zakat and Tax (GAZT), in close coordination with other relevant entities,
including SAMA, is responsible for managing the implementation, administration and enforcement of
VAT in Saudi Arabia.

When will VAT be introduced?


VAT will be introduced in Saudi Arabia on 1 January 2018.

Will VAT cover all goods and services?


Most goods and services will be subject to VAT, however, some goods and services will be exempt
and some will be out of scope.

At what rate will VAT be introduced?


The VAT rate will be set at a standard rate of 5%. Some goods and services will be zero rated (0%) or
exempt.

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Implementation of VAT in the Kingdom of Saudi Arabia - FAQs

How is VAT calculated?


VAT is calculated based on the value amount of the fee or charges of the service in scope of VAT.

If we look at an example where VAT at 5% is to be chargeable on the product or service, and assume
the value amount of the supply is SAR 100:

1. VAT is chargeable at 5% and therefore the VAT on this product/service is SAR 100 x 5% = SAR 5
2. This means that the total amount payable inclusive of VAT is SAR 100 + SAR 5 = SAR 105
3. The price will be advertised as inclusive of VAT and will be SAR 105

Who is subject to VAT Registration?


All companies, businesses or entities which make an annual taxable supply of goods and services in
excess of SAR 375,000 are legally required to register for VAT with GAZT.

What is SABBs VAT Registration Number?


In compliance with VAT Implementation Regulations, SABB Bank has registered for VAT.
The Saudi British Bank registered in Value Added Tax on: 20/02/1439, the VAT number is:
300002713100003

Does VAT apply to transactions prior to the implementation of VAT on 1 January, 2018?
Where there is an agreement for the supply of goods or services after 30 May 2017, and the contract
expires or is renewed after 31 December 2017, then VAT may be chargeable. There are certain SABB
products where this is the case, and VAT will be chargeable:
For transactions covered by transition period, VAT will be applicable at the time of delivery of goods
and services.

Example 1:
A customer holds a SABB credit card and on 1 July 2017 is charged an annual card renewal fee of SAR
200. Since the card renewal took place after the VAT Regulation date of 30 May 2017, VAT will be
charged on the fee for the period from 1 January 2018 to 30 June 2018. SABB will charge to the
customer an additional amount of SAR 5 in January 2018, in respect of VAT (calculated on six months
fee of SAR 100 @ 5%).

Example 2:
On 1 July 2017, a Bank Guarantee was issued with an expiry date of 31 December 2018. Commission
was charged at the start of the guarantee (1 July 2017) to cover the entire period of the guarantee.
VAT will be charged by SABB to the customer as follows:

1. For the period 1 July 31 December 2017, no VAT is applicable


2. From 1 January 2018, standard VAT rate of 5% will apply for the remaining period 1 January
2018 to 31 December 2018, on the commission amount already charged but relates to the
period from 1 January 2018.

How do I contact GAZT to find out more on VAT?


For further information on VAT, you can visit the GAZT website at www.gazt.gov.sa, or contact GAZT
by email on VAT@gazt.gov.sa or through the GAZT call center 19993.

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Implementation of VAT in the Kingdom of Saudi Arabia - FAQs

The impact of VAT for our customers

With the introduction of VAT, what will change for SABB customers?
SABB General Banking Terms and Conditions will be amended to include a clause on VAT and the
Banks requirement to collect the Value Added Tax(VAT).
Our Schedule of Services and Tariffs will be updated to reflect where VAT is applicable, and our
fees/charges will be displayed as inclusive of VAT.

The revised Schedule of Services and Tariffs will be published by 1st December 2017 on our website,
and will take effect from 1st January 2018. We recommend that you take the time to read it.

What will be the treatment of Islamic Finance?


Islamic Finance products and services are treated the same as their conventional equivalent, in
accordance with the laws and regulations as detailed by GAZT.

What will be the VAT treatment for General Banking transaction and administration services?
Fees including general account charges, cheque issuance charges, and money transfer fees will be
treated as standard-rated and VAT will be charged at 5%.

As an example, currently the fee for a transfer made by a SABB customer to a bank outside of the
Kingdom, would be SAR 75. From January 1, 2018, the fee will increase by 5%, so that inclusive of VAT
the fee will be SAR 78.75. Note that VAT is only payable on the fee, and not the transfer amount.

For transactions that are taxable, is there a way for the tax to be waived e.g. upon renewal of the
credit card annual fee?
The requirement to charge VAT is governed by the KSA VAT law. As a VAT-registered business, SABB
Bank is therefore under a mandatory obligation to charge VAT on its supply of taxable services.

How will VAT be charged if I make the same type of transaction several times?
VAT is a transaction based tax. This will mean that where VAT is applicable on a transaction, you will
be charged each and every time that transaction is made. For example, if account bank fees are
charged on a monthly basis and are VAT applicable, then VAT will be applied on each monthly fee
charged by SABB.

What happens if SABB charge me a fee for a product in error, and subsequently I am repaid a
refund by the Bank? Will I get the fee plus the VAT repaid to me?
Correct. The refund will be repaid, including any applicable VAT that has also been collected.

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Implementation of VAT in the Kingdom of Saudi Arabia - FAQs

Where can I see the impact of the VAT charges made by SABB to customers?
The revised Schedule of Services and Tariffs will be published by 1st December 2017 on our website,
and will take effect from 1st January 2018. We recommend that you take the time to read it.

You will also see clearly detailed on your bank statements, credit card statements, and other invoices
as issued by SABB, the VAT that has been charged transaction by transaction.

As a customer of SABB, is there anything I need to do?


You should have received a notification from us informing you of these changes which will come in
to effect. We will continue to update you with any relevant information so please do ensure you take
the time to read the Value Added Tax guide and regularly check our website
http://www.sabb.com/en/value-added-tax/
With regard to any VAT due on SABB product and services, SABB will ensure that this is correctly
charged to your account.

For any further information on VAT, you can visit the GAZT website at www.gazt.gov.sa, or contact
GAZT by email on VAT@gazt.gov.sa or through the GAZT call center 19993.

The impact of VAT on our products and services


How do we treat Home Finance and Personal Finance related services?
The profit charged on the finance amount will be treated as exempt.
Other applicable fees including administration fees and valuation fees, will be treated as standard-
rated.
Late payment penalty charges are out of scope, and VAT is not charged.

How do we treat Credit Cards and related services?


The profit charged on the finance amount will be treated as exempt.
Other fees including annual fees, cash advance and foreign currency exchange fees, will be treated
as standard-rated.
Late payment penalty charges are out of scope, and VAT is not charged.

Currently I pay an annual fee for my credit card. Will this be subject to VAT?
Yes. VAT will be charged on the annual fee of credit cards.

Will I be charged VAT on my credit card transactions?


The transactions on your credit card is between you and the vendor providing the goods or services.
SABB will not charge you additional VAT on these transactions.

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Implementation of VAT in the Kingdom of Saudi Arabia - FAQs

Will VAT be charged on withdrawals made through an ATM?


SABB do not charge any fees for a cash withdrawal using a Debit Card from any ATM within the
Kingdom, and VAT will not be charged on the withdrawal amount when you use your Debit Card.

If you use your SABB debit card at an ATM overseas, then VAT will be charged on the Cash
Withdrawal Fee that is incurred.

If you use your Credit Card for a cash withdrawal, either within or outside of the Kingdom, then VAT
will be charged on the Cash Advance Fee on the withdrawal from the ATM.

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