Goods sold with transportation, and the evidence required for an Internal Supply (Articles 27 and 28)

The Common VAT Agreement distinguishes between supplies of goods made without transportation and supplies made with transportation or dispatch. Article 11 of the Agreement provides that the place of a Supply of Goods that occurs with transportation or dispatch by the Supplier or to the account of the Customer shall be the place where the Goods are located when the transportation or dispatch commences. Article 12 of the Agreement contains a special case for Intra-GCC supplies with transportation. Articles 27 and 28 of the Implementing Regulations determine when a supply is made with transportation and what evidence a Saudi supplier must hold when goods are sent to another Member State.

When a supply is made with transportation

Article 27(1) provides that, subject to the second Paragraph, a Supply of Goods is made with transportation or dispatch in cases where the Supplier and Customer both agree that the goods will be transported to the Customer as a consequence of that Supply. The test is one of agreement between the parties that transport is a consequence of the supply.

Chain transactions: only one supply carries the transport

Article 27(2) addresses goods sold several times while moving directly from one country to another. Where it is contemplated that this transport will take place in respect of multiple Supplies of the same Goods to different Customers, only one Supply is considered to be made with transportation or dispatch. That supply is deemed to be the first one in which either the Supplier or the Customer is responsible for organizing the transport.

The other supplies in the chain are therefore supplies without transportation, located under the general rules for goods. Contracts and delivery terms should make clear which party organises transport, because that fact identifies the supply that carries it.

Goods arriving from outside Council Territory

Article 27(3) provides that where transportation of Goods supplied to the Kingdom commences from outside Council Territory, the place of Supply is in the Kingdom if the Goods have been imported into the Kingdom in accordance with the Unified Customs Law before the supply takes place. Any Supply of such Goods before import is considered as being made outside the Kingdom.

Internal Supplies to another Member State: the evidence rule

Article 28(1) provides that where a Taxable Person makes an Internal Supply of Goods from the Kingdom to a Person residing in another Member State, that Taxable Person must retain evidence that the Goods have been transported to the state of destination.

Article 28(3) requires that evidence to include each of the following:

• commercial documentation identifying the Customer and the place of delivery of the goods;
• transportation documentation evidencing the delivery or receipt of goods in the State of destination; and
• a customs declaration, if applicable.

The sixty-day period and its consequences

Article 28(2) provides that a Taxable Person who does not have evidence that the Goods have been transported within sixty (60) days of the Supply taking place must treat the Supply as being made without transportation or dispatch from the Kingdom until such evidence is later obtained.

Article 28(4) allows the Authority to reject documentation that does not sufficiently evidence the transport to the destination state. In that case the Supply is treated as made without transportation or dispatch from the Kingdom until sufficient evidence is later obtained. This mirrors Article 12(3) of the Agreement, under which, where transport from one Member State to another cannot be established, the place of supply is where the Goods are located when transportation or dispatch begins.

The practical effect is that a supplier unable to evidence the movement within sixty days should account for the supply as one made in the Kingdom, and revisit that treatment only when the required evidence is obtained.

Reporting to the GCC electronic system

Article 28(5) provides that, following the establishment of an Electronic Services System by the GCC Secretary General in accordance with the Agreement, and upon a request from the Authority, a Taxable Person who makes an Internal Supply must provide the Authority with information corresponding to that supply for entry into that system, in the format the Authority prescribes.

Instruments relied on: VAT Law, Article 13; Common VAT Agreement, Articles 11 and 12; Implementing Regulations, ninth edition, 26/11/1444H corresponding to 15/6/2023G, unofficial English translation, Articles 27 and 28 (neither was amended by ZATCA Board Resolution No. (01-06-24) dated 17/05/1446H, published in the Official Gazette, Umm Al-Qura issue 5082, on 18 April 2025). The Arabic text prevails.

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