Mandatory VAT registration when twelve months of supplies exceed SAR 375,000
A resident person in the Kingdom who is not already registered must, at the end of each month, calculate the value of supplies made in the Kingdom in the twelve months then ended. Where that value exceeds the Mandatory Registration Threshold, the person must apply to the Authority to register within thirty days of the end of that month. The threshold stated in the Common VAT Agreement is SAR 375,000. Registration under this rule takes effect from the start of the month after the month in which the application is submitted.
The obligation and the threshold
Article 3 of the Value Added Tax Law obliges a Taxable Person to register according to the Economic Activities carried out in the Kingdom and in accordance with the Agreement. The Agreement defines the Mandatory Registration Threshold as the minimum limit of the value of actual supplies at which the Taxable Person becomes obligated to register for Tax purposes. Article 50(2) of the Agreement states that the Mandatory Registration Threshold shall be SAR 375,000, or its equivalent in the GCC State currencies. The same paragraph reserves to the Ministerial Committee a right to amend that threshold after it has been in force for three years. The instruments relied on do not record any such amendment.
Article 50(1) of the Agreement obliges a Taxable Person to register where two conditions are met: the person is resident in any Member State, and the value of his annual supplies in that Member State exceeds or is expected to exceed the Mandatory Registration Threshold. For a Resident Person, the case in which supplies have already exceeded the threshold is implemented by Article 3 of the Implementing Regulations. The case of supplies expected to exceed the threshold is a separate rule in Article 4 of the Regulations.
The twelve-month test and the thirty days
Article 3(1) of the Regulations provides that, for registration purposes, every Resident Person in the Kingdom who is not registered by the Authority must, at the end of each month, calculate the value of his Supplies made in the Kingdom within the twelve months then ended, in accordance with the requirements set out in the Agreement. Where that value exceeds the Mandatory Registration Threshold detailed in the Agreement, the Person must apply to the Authority to register within thirty (30) days of the end of that month, pursuant to Article 8 of the Regulations.
The thirty-day period is counted from the end of the month at which the twelve-month calculation is made. Article 3 does not provide that the application must be made within thirty days of the date, within the month, on which the threshold was exceeded.
What the annual-supplies figure includes
The calculation is not restated in full in Article 3. It is to be made in accordance with the Agreement. Article 52(1)(a) of the Agreement calculates the value of annual supplies as the total value of supplies, excluding exempted supplies, made by the Taxable Person at the end of any month plus the previous eleven months. Article 52(2) states that the total value of supplies consists of the value of Taxable Supplies except for the value of a supply of Capital Assets; the value of Goods and Services supplied to the Taxable Person who is obliged to pay Tax under the Agreement; and the value of Intra-GCC Supplies of the kind described in Article 52(2)(c).
Article 6(5) of the Regulations separately excludes the value of a Supply of Capital Assets from the total value of annual supplies subject to Tax, where the Capital Asset is used in the operation and furtherance of the Economic Activity in accordance with a commercial registration or a similar licence from the competent authority, and has not been held to generate rental income or similar income or to be supplied at a later time.
The application and the date registration takes effect
Article 8(1) of the Regulations requires an application for registration to be made by completion of the form prescribed by the Authority. Article 8(2) prescribes the minimum information the application must contain, including the value of annual Supplies or annual expenses and the effective date of registration, or any alternative effective date requested.
Article 3(2) provides that the registration of a Person who registers under Article 3(1) takes effect from the start of the next month following the month in which the registration application is submitted. That effective date is distinct from the month in which the twelve-month value exceeded the threshold.
Expected supplies are a different test
Article 4 is a different mandatory-registration test. It requires a Resident Person who is not registered to estimate, at the end of each month, the value of annual Supplies to be made in the next twelve months. Where that value is expected to exceed the Mandatory Registration Threshold, the Person must apply within thirty (30) days of the end of that month. Registration under Article 4 takes effect from the start of the first month in which annual Supplies made in the Kingdom were expected to exceed the threshold. Article 4 is not the rule that applies once historic supplies have exceeded the threshold.
Where a Person has failed to apply as prescribed, Article 6(1) of the Regulations provides that the Authority may register that Person without an application, with effect from the date prescribed under Articles 3 and 4.
What the legislation does not determine
The instruments relied on do not record whether the Ministerial Committee has amended the figure of SAR 375,000. They do not state any monetary penalty, late-registration assessment, or transitional relief for a failure to apply within the thirty days. They do not, beyond the distinction drawn above, set out the prospective test in Article 4 in full, and they do not set out voluntary registration under Article 7 of the Regulations and Article 51 of the Agreement. Deregistration, Tax Group registration, and the aggregation of Related Persons under Article 52(3) of the Agreement are outside the rule stated here. The contents of the Authority’s prescribed form, beyond the minimum information in Article 8(2), are not set out in these provisions.
Instruments relied on: Value Added Tax Law, Article 3, English text of the bilingual instrument (identified in the preamble to Resolution No. (01-06-24) as issued by Royal Decree No. (M/113) dated 02/11/1438H corresponding to 20/07/2017G, as amended); Implementing Regulations, ninth edition, 26/11/1444H corresponding to 15/6/2023G, unofficial English translation (Article 3 was not amended by the text of ZATCA Board Resolution No. (01-06-24) relied on here); Common VAT Agreement, Articles 1, 50 and 52, executed in Arabic on 27/2/1438H corresponding to 27/11/2016. The Arabic text prevails.