The General Authority of Zakat and Tax (GAZT) on 2 March 2021 released guidelines about value added tax (VAT) registration and payment for online and e-commerce transactions and activities.
The guidelines (available in Arabic) provide that it is mandatory for online enterprises to register for VAT if their annual turnover exceeds SAR 375,000 (approximately U.S. $100,000). VAT registration is optional if yearly sales fall between SAR 187,500 and SAR 375,000.
Online stores are defined as any digital platform that is used for e-commerce activities, and includes activities on Instagram, Whatsapp, Facebook, and LinkedIn, among others.
The guidelines set forth steps on how to:
- Register for VAT
- Display the VAT certificate on their platforms
- File VAT returns and remit VAT
Registration first requires that the online enterprise be registered with the Ministry of Commerce or the Ministry of Investment, and this is followed by registration on the GAZT portal. Approval of registration is to be granted by GAZT within two business days. Once a VAT certificate is acquired, online enterprises must display it on their platforms to avoid penalties up to SAR 50,000. After registration, the enterprise will be required to file the VAT returns by means of the GAZT portal.
Source KPMG
