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Overview of Tax Refund for Eligible Persons Value Added Tax (VAT) is applied to most supplies of goods and services made by taxable suppliers in the Kingdom, taking into account some limited exceptions as stipulated in the provisions of the system and its executive regulations. The taxable person must impose VAT at the basic rate of 15% on taxable supplies of goods and services provided to any person or entity in the Kingdom, regardless of the identity or tax status of the customer.
Public benefit projects: A public benefit project is one that is limited to the construction, demolition and reconstruction, renovation, or expansion of mosques, prayer halls, health centers, educational facilities, and other public benefit projects. These projects are to be handed over to the relevant authority in the Kingdom upon completion, as a donation without any material compensation or reward being received by the donor at or after the handover of the public benefit project to the relevant authority or any other person or entity.
Conditions for registering the donor as a qualified person for tax refund: For the donor who incurs and pays value-added tax in the context of the public benefit project, they must submit a registration request to the authority as a qualified person for refund according to the provisions of Regulation (3) when all the following conditions are met: 1. Approval of the public benefit project by the competent authority, provided that the donor submits a contract or agreement between them and the competent authority indicating that the project is offered as a donation and for public benefit purposes.
Donation: This condition means that the donor who incurred value-added tax on goods and services in the context of carrying out the public benefit project must obtain approval from the competent authority, provided that the approval is in the form of an official written document, such as a contract or agreement proving that this project has been presented.
The donor must provide a contract or agreement for the execution of the project between themselves and any third party, unless the donor is an individual entity executing the project themselves. This condition clarifies the mechanism for handling document submission based on who is executing the project, whether it is the donor themselves or a third party. Therefore, it can be clarified that if the donor is not executing the public benefit project themselves but is dealing with a third party to carry out the execution, the donor must provide a contract or agreement.
The donor must provide the construction permits for the public benefit project issued by the relevant authority or authorities: To ensure that the project complies with regulatory requirements, the donor is required to submit the construction permits issued by the relevant authority or authorities, which include, but are not limited to, the building permit. It is also required that the licenses have been issued by the competent authorities.
The donor is not able to recover the value-added tax incurred on the implementation of the project as input tax in their capacity as a qualified real estate developer or other qualified persons according to the provisions of the system and regulations: This condition indicates that the donor must bear the cost of the value-added tax without being able to recover it.
The project receiving the donation should not be in violation of the laws, regulations, decisions, and any equivalent provisions in force in the Kingdom.
Expenses and costs eligible for reimbursement are the expenses on which the donor can reclaim value-added tax. That is, the donor must verify that the value-added tax imposed in the context of implementing the public benefit project is eligible for reimbursement.
Expenses, for example, are as follows:
- Construction and building costs: costs of purchasing materials and construction.
- Service costs: such as fees paid to consultants and engineers.
And those expenses must meet the following regulatory requirements: The supplier must correctly impose value-added tax on the goods and services received by the donor; it is required that the tax invoice meets all the regulatory conditions stipulated in Article (53) of the executive regulations of the Value Added Tax system.
Where each refund request related to goods and services supplied to the qualified person must contain the following information:
A. Supplier's name and tax identification number.
B. Invoice date.
C. Invoice number.
D. Total invoice amount.
E. Value-added tax amount.
F. Description of the purchased goods or services.
Reference/Citation
Zakat, Tax, and customs Authority
https://zatca.gov.sa/ar/HelpCenter/guidelines/Pages/default.aspx
