Saudi Arabia’s General Authority for Zakat and Tax (GAZT) has announced that all lease contracts that were concluded before January 1 are exempt from VAT.
The announcement affects assets that were delivered under leasing or rental deals last year including vehicles and real estate.
In a statement to the state-run Saudi Press Agency, GAZT clarified that these leases were considered non-continuous supplies and were excluded from exceptions for supplies of a consecutive nature.
Contracts concluded after January 1 will still be subject to the 5 per cent VAT rate and the tax on the total value of the goods supplied is payable on the date of the supply of the original contract, issue of the tax invoice or data of receipt of partial or full payment.
Financial activities including interest on loans or lending charges on credit cards are exempt from VAT. However, the tax will apply to fees or commissions relating to transfer and other activities.
All companies with annual revenue exceeding SAR1m ($266,666) are required to register for VAT.
Those that fail to settle their payable tax on time face fines of equal to 5 per cent of the value of the unpaid tax each month.
The kingdom is implementing VAT alongside the other GCC countries but the UAE was the only other member of the bloc to also set a January 1, 2018 deadline.
The other countries have until 2019 to follow.
Saudi Arabia is expecting to bring in SAR35bn ($9.3bn) in VAT revenues during the tax’s first year, says a ME website.
