Guideline for

Proportional Deduction Relating to Input Vat VAT incurred, which relates to a Taxable Person’s VAT-exempt activities, such as exempt Financial Services or residential rental, is not deductible as Input VAT. A person making both taxable and exempt supplies can only deduct the Input VAT related to the taxable supplies. If a Taxable Person incurs general costs or expenses (overheads) in the making of taxable supplies, and others that are exempt from VAT, he must, in that event, split the costs and expenses precisely to specify those costs that relate to the taxable supplies. The input tax will be determined in accordance with the following rules23: The overhead costs/expenses incurred by the Taxable Person for making both taxable and exempted supplies must be apportioned to most accurately reflect the use of those costs in the taxable portion of the Taxable Person’s activities. Deduct in full Input VAT directly attributed to Taxpayer’s taxable sales No deduction Input VAT directly attributed to Taxpayer’s exempt sales Partial deduction based on apportionment Overheads and all other input VAT that cannot be directly attributed 23. Article 51, Implementing Regulations A prescribed default method of proportional deduction is calculated on the value of supplies made in the year, using the following fraction: The above-mentioned method does not include supplies of Capital Assets made by the Taxable Person, as these distort the use of input VAT. Alternative attribution methods, using other calculation approaches than the Value of supplies, may be approved with the Authority in cases where these better reflect the actual use of VAT incurred. Further information about the deduction of VAT and proportional VAT recovery is provided in the Input Tax Deduction and Partial Exemption Guideline. The Value of Taxable Supplies made by the Taxable Person in the last calendar year The total Value of Taxable Supplies and Exempt Supplies made by the Taxable Person during the last calendar year 13. VAT Obligations for Taxable Persons A Taxable Person must evaluate its tax obligations and also comply with the conditions and obligations relating to VAT. This includes registering for VAT as necessary, exactly calculating the net amount of VAT payable, and paying the tax at the time due, as well as keeping all necessary records and cooperating with officials of the Authority on demand. If a Taxable Person is not sure of its obligations, the Authority must be contacted through its website at zatca.gov.sa or by other means of communication, Below follows a review of the most important tax obligations provided for in the Law and the Implementing Regulations. 13.1 Issuing Tax Invoices A Supplier must issue a tax invoice for each taxable Supply made to any VAT-registered person or to any other legal person, or issue a simplified invoice if the Value of the Supply is less than SAR 1,000, or for supplies made to the end consumer, by no later than fifteen days following the end of the month in which the Supply is made. The tax invoice must clearly detail information such as the invoice date, the supplier’s tax identification number, the taxable amount, the tax rate applied, and the amount of VAT charged 24. If different rates have been applied to supplies, the Value of each Supply at each rate must be separately specified, as well as the VAT applicable to each rate. A tax invoice may be issued in the form of a commercial document (e.g., a ticket receipt), provided that the document contains all the requirements for the issuing of tax invoices as set out in the Implementing Regulations to the Law25. Further information on the requirements for tax invoicing can be found in the Taxpayer Guideline on Invoicing and Records. 24. For more details, refer to the Invoicing Guideline and Article 53, Implementing Regulations 25. Article 53, Implementing Regulations