JEDDAH: Any institutions with an annual revenue exceeding SR1 million ($266,666) that fail to register at the VAT system before the deadline will face a fine of SR10,000, the General Authority of Zakat and Tax (GAZT) has announced.
The GAZT urged institutions that have not registered yet to do so before Jan. 1, 2018, to avoid legal consequences, which would not be limited to fines but would also include other penalties related to violating the tax system.
The GAZT stressed that the penalty for not settling the payable tax before the deadline is equal to 5 percent of the value of the unpaid tax for each month or part of a month. The fine for not presenting the tax declaration before the deadline is between 5 and 25 percent of the value of the tax, which should have been declared, while the non-committed institutions will also face stopping many government services.
The GAZT called all institutions to present their tax-related documents and ensure the accuracy of the data they include, because presenting inaccurate information to avoid tax may expose the infringing institution to a set of strict penalties, ranging from imposing a fine no less than the value of payable tax up to three times the value of the relevant goods or services.
On the other hand, any institution which is not registered with the VAT system and issues a tax bill will be fined a maximum of SR100,000, without infringing any more severe penalties stipulated in other systems.
The implementing regulations of the Value Added Tax (VAT) system has defined exempted activities in the financial sector that include many types of transactions and services, such as interest on loans or lending fees charged with an implicit profit margin.
These exempted activities include loans, credit cards, mortgages, finance leases, banknotes or securities transactions, current accounts, deposits and savings accounts. The transfer of funds from the tax has also been exempted and charged to the transfer fees.
As for the transfer of funds, the executive regulation demonstrated that the amount transferred is not subject to VAT, but is charged with a transfer fee of 5 percent and paid by the person who transfers the money.
To read all the information relating to the VAT, the GAZT invited institutions to visit its website or call (19993) for all inquiries.
The VAT official website (vat.gov.sa) provides tools and information that support businesses and help them prepare for the application of VAT, in addition to visual aids, registration and VAT application information, and the list of goods and services subject to VAT.
The move is in line with an International Monetary Fund (IMF) recommendation for Gulf states to impose revenue-raising measures including excise and value-added taxes to help their adjustment to lower crude oil prices, which have slowed regional growth.
It is estimated that the VAT’s imposition will raise between $7 billion and $21 billion annually — or between 0.5 percent and 1.5 percent of regional GDP (gross domestic product).
Source Credit: Arab News