The Kingdom of Saudi Arabia Offers Non-Resident Taxpayers VAT Refunds

In accordance with Article (67) of the GCC VAT Framework, the Kingdom of Saudi Arabia Tax Authority (“Saudi Tax Authority”) released in February 2023 a Tax Circular outlining the mechanism, controls, and procedures for tax refunds to taxpayers who are not residents of a GCC Member State but who engage in economic activity subject to VAT (or a similar tax system) registration in another nation.

This VAT refund mechanism that has been issued by the Saudi Tax Authority requires non-resident taxpayers to:

  1.     Determine if they would meet the criteria for a qualified non-resident taxpayer;

  2.     Determine and calculate the costs associated with the Saudi VAT in 2022 (calendar year basis);

  3.     Determine whether the necessary records and paperwork are available  for the payments that were received by the Saudi suppliers;

  4.     Determine if these expenses would be refundable under the VAT legislation; and

  5.     Take into account the bandwidth of their internal resources to facilitate the refund application.

Non-resident taxpayers can apply for VAT refunds using the online portal in a two-stage process:

·       First Stage: Registration

Using the “Register as a Person Eligible to Refund Value Added Tax” e-service, the applicant must meet the following criteria to prove that he is a qualified non-resident taxpayer:

1. The applicant is not a resident of the GCC, but is incorporated in a nation with a VAT system of transactional taxes, and is registered to pay those taxes; and
2. Similar mechanisms exist in the nation where the applicant is incorporated, and they allow Saudi citizens to refund their taxes (i.e., reciprocation).

·       Second Stage: Refund application

This stage requires the applicant to meet the following criteria:

1. The non-resident taxpayer's payment of tax is unrelated to the provision of goods or services in a GCC Member State;
2. The non-resident taxpayer's tax payment was made for his business dealings with the production of taxable goods and was exempt from the restrictions on input tax recovery (e.g., entertainment expenses);
3. The application must be made for a total tax amount of SAR 1,000 or higher; and
4. The application and all accompanying papers must be filed electronically using the online site of the Saudi Tax Authority, noting that the Saudi Tax Authority has the right to request any of these supporting documents in a hard copy format.

Moreover, it should be noted that the applicant must show that he complies with the applicable requirements for each stage of the refund application process, including the provision of required documents and information.

In addition, the provided supporting tax invoices must comply with the standards outlined in Article 53 of the Saudi VAT Executive Regulations for electronic invoicing and be accompanied by payment documentation, noting that only one refund request may be made in a calendar year.

Within 20 days of processing the application, the Saudi Tax Authority will notify the qualifying non-resident taxpayer of the outcome. If the refund application is approved, the Saudi Tax Authority will refund the VAT within 60 days. However, it should be noted that the circular is not clear whether the reference to “days” is made to calendar days or working days. Without a precise reference, calendar days would be assumed.

Finally, the circular allows the applicant to object to the decision made by the Saudi Tax Authority after reviewing his refund application outcome.

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