Article 20(1) of the KSA VAT Implementing Regulations currently specifies that a separate supply of goods or services occurs (and tax is due) at the earlier of each instalment due date or each actual payment. This will now be modified to refer only to supplies of services. This appears to be in line with ZATCA’s long-standing position on such arrangements as Ijara leases (which contemplate eventual transfer of ownership and are therefore treated as a single supply of goods at the outset).
Secondly and more importantly, ZATCA will amend the time of supply for all goods or services provided to government agencies in accordance with the new Government Tenders and Procurement Law. Currently, taxpayers making such supplies would typically need to account for VAT to ZATCA on all invoices raised to the government bodies in a VAT period, regardless of when the invoice is approved and eventually paid. They can thus face significant funding costs between paying over the VAT and receiving it from their customer. This new measure aims to mitigate that cost by ignoring the raising of an invoice for VAT accounting purposes and focuses instead on the earlier of payment receipt or the issue of an official procurement payment order.
As of 1 November 2021, the date of supply will therefore be the earlier of:
ZATCA has also clarified that certain scenarios will not be covered by the amendments, as follow:
The Saudi VAT return form will also have a new field added for standard-rated supplies to government entities.