VAT Treatment on Export of Services outside GCC

Tally Solutions | Updated on: August 23, 2023

The volume of services exported from Saudi Arabia has historically been lower than the volume of goods exported. According to a 2015 IMF (International Monetary Fund) report, the major services exported from Saudi Arabia are travel and transportation. However, with the passage of time, the volume of export of services from Saudi Arabia is increasing. With the introduction of VAT, it is important for taxpayers exporting services to understand the implications of VAT. Let us understand the applicability of VAT on the export of services from Saudi Arabia to non-GCC States.

What is meant by export of services to a non-GCC State?

Supply of services by a person registered under VAT in Saudi Arabia to a person who does not have a place of establishment or fixed establishment in any GCC State (UAE, Bahrain, Kuwait, Oman, or Qatar) is the export of services to a non-GCC State.

How is export of services to non-GCC States treated under VAT?

Export of services from Saudi Arabia to a non-GCC State is zero rated.

Can input tax be recovered on inputs used to export services?

Yes, a person registered under VAT in Saudi Arabia is eligible to recover tax paid on inputs used to export services.

Are any conditions applicable?

Yes, a person registered under VAT in Saudi Arabia is eligible to recover tax paid on inputs used to export services.

Yes, export of services from Saudi Arabia will be zero-rated, provided the following conditions are met:

The supplier has no evidence that the customer has a residence in any GCC State and has evidence that the customer is resident outside the GCC territory
The supplier intends that the services are consumed by the customer outside the GCC territory
The supplier has no evidence that the benefit of the services will be enjoyed within the GCC territory
The customer should not have a place of residence in any GCC State
The benefit of the service is not received by the customer when the person is situated in a GCC State
The services are not related to any tangible goods or property located within a GCC State during the supply

This basically means that the customer should not have a place of residence in any GCC State. Also, the customer must not be present in any GCC State at the time of receiving the service. Further, it is important to note that the services should not be related to any tangible goods or property located within a GCC State during the supply.

Hence, just like the VAT treatment of export of goods from Saudi Arabia to non-GCC States, export of services to non-GCC States is also zero rated. Since it is a zero-rated supply, input tax can also be recovered on these supplies. However, the above conditions need to be satisfied for the export of service outside the GCC territory to qualify as a zero-rated supply. Taxpayers should take note of these requirements to ensure that their exports of services are zero rated under VAT in Saudi Arabia.