Should suppliers from Saudi add local VAT

Hi, can anyone help with this VAT query for services in Saudi

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If you receive a supply of services from Saudi Arabia for subconsultant fees for a Saudi Arabian project, should they be charging their local VAT of 15% to the UK customer if the UK customer doesn't charge VAT to their Saudi client for services as this falls outside the scope under the special rule?

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By KatHL
03rd May 2024 12:00

I should also mention that the place of supply is in Saudi which is why the subconsultant may have to charge their local VAT. If this is the case then would the UK company be able to receive any type of tax relief for the Saudi local VAT charged?

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Replying to KatHL:
04th May 2024 01:08

KatHL wrote:

If this is the case then would the UK company be able to receive any type of tax relief for the Saudi local VAT charged?

The UK company, assuming UK resident and performing services that did not amount to a foreign trade through a PE (including any contract treated as amounting to a registerable 'virtual PE') in KSA would likely be chargeable to UK corporation tax.

Irrecoverable foreign VAT suffered would in practice be added to the cost of subcontracted supplies and treated as a deductible expense of the UK trade.

Depending on what the services are and where the project is, a more troublesome issue from the point of view of UK tax relief is usually witholding tax deducted from invoices for services supplied to a company in KSA. Since these are effectively deductions from gross income rather than from ("same") profits assessed to CT in UK any double-taxation relief by way of credit relief is likely to be restricted.

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03rd May 2024 12:49

You don't say what the nature of the supplies is. Assuming services ... then structurally at least (and subject to any disregards conceded in practice there at local level which, given how things are, is probably unlikely !) >>

If the place of supply of the s/c services is Saudi, any claim for recovery by the UK company would have to be in Saudi and for that you'd need to be registered there. Because the end client is presumably reverse-charging, the Saudi VAT chain is essentially broken by the insertion of a non-(Saudi) VAT registered UK exporter.

Does that make sense ?

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By Jason Croke
03rd May 2024 18:11

Why is the place of supply of services deemed to be in Saudi, is this a land related supply?

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