VAT to apply on e-commerce ​transactions in Saudi Arabia

Value-added tax (VAT) will apply on e-commerce transactions in Saudi Arabia as of Jan. 1, 2018, the General Authority for Zakat and Tax (GAZT) said on its Twitter account.

The 5 percent VAT will also be imposed on online purchases from outside the Kingdom, as well.

The tax will temporarily apply on goods imported from the GCC, until the unified electronic service system between GCC countries is activated.

Electronic services and products such as software, electronic subscriptions, mobile applications, and digital content will be subject to special laws.

As for services obtained from overseas, eligible local vendors must calculate the tax under the reverse commissioning mechanism, by which a taxable service recipient can cover the VAT instead of the foreign supplier.

In case the recipient is an end-user, foreign suppliers must register for the Kingdom’s VAT, regardless of the size of supply.

For electronic services provided via web platforms acting as intermediaries for non-resident suppliers, these platforms will be responsible for collecting the tax. 

Saudi Arabia and the United Arab Emirates plan to introduce VAT from Jan. 1, as part of efforts among oil-producing GCC countries to narrow budget deficits triggered by the crash in crude prices.