In June 2019, the General Authority of Zakat and Tax (‘GAZT’) issued a guide explaining the VAT implications associated with the retail business as well as requirements for a business having multiple Commercial registrations, retail price printing requirements and input VAT deduction.
At this time, the guide is only issued in Arabic and can be accessed here.
The highlights of the guide issued by GAZT are mentioned hereunder:
Multiple Commercial Registrations
GAZT clarified in the guide that in the event a retailer has multiple branches/ stores etc. having individual Commercial Registration numbers (‘CRs’), such branches/ stores etc., shall be considered as part of one legal person.
The legal person’s CR must be used for VAT registration purposes and the Tax Identification Number (‘TIN’) of the legal person will be applied to all branches etc.
Further, GAZT also explained that in the event that the supplier is an entity with several branches in different countries, the supplier’s place of residence and obligations regarding the calculation and collection of VAT must be determined on each supply according to the country most closely associated with that supply.
Retail prices and VAT
GAZT explained in the guide that VAT must be displayed as part of the price of the individual products and if the total VAT amount or the total taxable amount calculated for a supply equates to a figure that includes a fraction of a halala, the VAT amount on the Tax Invoice should be rounded to the nearest halala.
Further, GAZT also clarified that in the event, the final agreed price in lower than the published price, the VAT shall be calculated based on the total final agreed price paid or payable.
Discounted price and VAT
GAZT explained in the guide that VAT is always payable on the reduced price (due to offering of discounts by the suppliers).
GAZT also explained the concept of retroactive discounts i.e. bulk quantity discount and mentioned that the supplier must issued a tax compliant credit note for these kind of discounting arrangements.
Single supply or multiple supplies
GAZT reiterated the concept of single/ multiple supplies and VAT implications thereon. It has been mentioned in the guide that it is very important to determine whether the supply constitute a single supply or multiple supplies from a VAT perspective.
A single supply can be identified as a supply consists of several elements and one element out of others is clearly controlling the rest. In such a case, other elements shall be considered to be part of main element in the supply.
In case of multiples supplies, if each element of the supply is visible and identifiable, VAT implications should be considered based on the nature of the individual elements of the supply.
In all cases, the nature of the supply as well as intention of the customer/ supplier will be relevant to determine whether it is a single supply or multiple supplies.
A classical example of multiple supplies has been explained by GAZT by way of referring to an ‘optional warranty’ a customer wishes to obtain from the supplier.
Goods or services provided as part of the supply
GAZT also explained the concept of ‘deemed supply’ in this guide and clarified that certain services e.g. free delivery of goods shall not be seen as a ‘deemed supply’ as the same does not reflect any separate supply of services.
However, for all other separately identifiable services which are being provided free of cost, the concept of deemed supply should apply and VAT needs to be reported as mentioned in the relevant provisions of the Implementing Regulations.
The Guide reiterates the concept of vouchers and loyalty programs which has been explained in detail in previous guides issued by GAZT.
GAZT also discussed the concept of Ecommerce in the Guide (a separate Guide was previously issued by GAZT on this matter).
In this section, place of supply rules and VAT implications have been discussed by GAZT.
Businesses operating in the retail sector as well as manufacturers of the products are suggested to read this guide to ensure that they are compliant with the requirements of ‘published prices’ as mentioned in this guide.
Taxpayers are also suggested to be mindful of the requirements of ‘single’ vs ‘multiple’ supplies and treatment of VAT on such supplies in the manner explained in the guide.
Download : KSA: VAT Guide on the Retail sector