RIYADH: The General Authority for Zakat and Income Tax (GAZT) announced that all finance lease contracts or lease contracts expired by acquisition and concluded before Jan. 1, 2018, the date the value-added tax (VAT) was implemented on assets including cars or real estate, are exempted from VAT.
GAZT said that they are considered non-continuous supplies and are excluded from exceptions related to supplies of a consecutive nature. VAT will therefore not be collected on the installments due from these contracts Jan. 1, 2018.
The authority explained that all finance lease contracts or lease contracts expired by acquisition and concluded after Jan. 1, 2018 will be subject to the 5 percent VAT.
According to the provisions of the unified agreement for VAT, the tax law and its executive regulations, the tax will be collected on the value of the underlying asset, and the profits or benefits related to the contract will not be included because it is exempt from tax.
The tax on the total value of the goods supplied will be payable on the date of the supply of the underlying asset, the date of issue of the tax invoice, or on the date of delivery of the partial or full payment and within the amount received, whichever is earlier, provided that the date of supply is the date of delivering the goods at the disposal of the customer.
Several activities in the exempted financial sector are included in the implementing regulations of the VAT system.
These activities include interest on loans or lending fees charged with an implicit profit margin, including loans and credit cards, mortgages, finance leases, banknotes or securities transactions, as well as current accounts, deposits and savings accounts.
Source Credit: Arab News