Tax authority lists financial services exempt from Saudi VAT

Saudi Arabia has specified the financial services and products to be exempt from value-added tax (VAT) under the new executive regulations, the General Authority of Zakat and Tax (GAZT) said in a statement Wednesday.

Exempt services are interest on loans, lending fees charged with an implicit margin, such as loans and credit cards, mortgages, financial leasing, transactions involving money and securities, as well as current, deposit and savings accounts.

GAZT added that other exempt services include the provision or transfer of life insurance/reinsurance contracts, whether in the form of conventional, Takaful or Islamic contracts provided by a licensed insurer in the Kingdom.

Similar contracts provided by a non-resident supplier fall under the same category.

Meanwhile, fees, commissions or commercial discounts on financial services will be subject to VAT.

For money transfers, a 5 percent VAT will only apply to the transfer fee, which will be paid by the sender.

GAZT added that the institutions engaged in taxable economic activities have the right to deduct input tax--whether standard rated or zero-rated, while the input tax will not be deducted on VAT-exempt activities.

Saudi Arabia will implement VAT starting January 1, 2018, Argaam earlier reported.