The VAT legislation in the Kingdom of Saudi Arabia is based on the Gulf Cooperation Council (GCC) Common VAT Agreement. Similar to §18 Act.9 of the German VAT, this agreement allows foreign businesses to reclaim the input tax paid in Saudi Arabia. The application for an input tax refund must be submitted annually for the previous calendar year to the Saudi tax authority (Zakat, Tax, and Customs Authority, or ZATCA) by June 30th.
Following the introduction of VAT in Saudi Arabia in 2018, there was initially no specific procedure for foreign businesses to apply for input tax refunds. Many businesses used manual applications to claim their refunds.
In 2022, ZATCA introduced a registration process on their website, enabling foreign businesses to obtain the status of an "eligible person." After successful registration, these businesses can submit applications for input tax refunds. The procedure consists of two stages: first, obtaining the eligible status, and second, submitting the refund application for each year. Initially, there were some technical difficulties with the online application process, but these have since been resolved.
In February 2023, ZATCA published a detailed guideline in Arabic that further explained the two-stage procedure for foreign businesses to submit input tax refund applications.
According to the latest guidelines, foreign businesses conducting economic activities outside Saudi Arabia and paying input tax on services or goods in Saudi Arabia can apply for an input tax refund. This refund is limited to goods and services used for economic activities outside of leisure, personal, or certain restricted categories.
Further eligibility criteria include:
- The business must have neither a head office nor a permanent establishment in Saudi Arabia.
- The business must be based in a country with a similar VAT system or must allow Saudi nationals and businesses to reclaim input tax amounts.
- The business must be registered for VAT in its home country.
- The refund amount must exceed SAR 1,000.
- All invoices and payment receipts must be provided.
For the input tax refund procedure in Saudi Arabia, precise documentation and timely submission of the application are crucial. Therefore, a proper and complete application for all input tax amounts paid in 2023 must be submitted by June 30, 2024.
