Aggregation of Related Persons’ annual supplies for VAT registration
Where two or more Related Persons carry on similar or related activities, the Authority may issue a notification requiring that the value of their annual Supplies be added within a specified duration, and that this combined figure be used as each Person’s annual Supplies value. The Agreement defines Related Persons and permits each Member State to determine conditions for aggregating the business revenue of Related Persons who conduct similar or related activities and registering each of them mandatorily on the basis of the total business revenue. Aggregation under Article 9(2) of the Regulations is therefore an Authority-notified mechanism, not an automatic self-assessment rule stated in that paragraph.
The Authority’s power under Article 9(2)
Article 9(2) of the Implementing Regulations provides that in cases where two or more Related Persons carry on similar or related activities, the Authority may issue a notification requiring that the value of their annual Supplies be added within a specified duration, and this combined figure be used as each Person’s annual Supplies value.
Several elements follow from that text. The Persons must be Related Persons. They must carry on similar or related activities. The Authority acts by issuing a notification. The notification requires addition of annual Supplies within a specified duration. The combined figure is then used as each Person’s annual Supplies value. Article 9(2) does not itself state that Related Persons must aggregate without a notification from the Authority.
Who are Related Persons under the Agreement
Article 1 of the Common VAT Agreement defines Related Persons as two or more Persons where one of them has supervisory or directive control over the others in such a way that he has administrative power that enables him to influence the business of the other Persons from a financial, economic or regulatory aspect. This includes Persons who are subject to the authority of a third Person that enables him to control their businesses from the financial, economic or regulatory aspect.
That definition turns on supervisory or directive control and administrative power to influence, or third-Person authority enabling control, from a financial, economic or regulatory aspect. Article 9(2) uses the term Related Persons without restating the definition; the Agreement definition is the natural reference point for that term in the registration framework.
Agreement aggregation provision
Article 52(3) of the Agreement provides that each Member State may determine the conditions and provisions for the aggregation of the business revenue of Related Persons who conduct similar or related activities and register each of them mandatorily on the basis of the total business revenue. Article 9(2) of the Regulations is the Kingdom’s implementing provision for that Member State discretion: notification by the Authority, addition within a specified duration, and use of the combined figure as each Person’s annual Supplies value.
Effect on the registration threshold test
Once a combined figure is treated as each Person’s annual Supplies value pursuant to a notification under Article 9(2), that figure is the annual Supplies value for comparison with the Mandatory Registration Threshold of SAR 375,000 in Article 50(2) of the Agreement under the mandatory registration tests. Article 9(2) does not itself restate Articles 3 and 4 of the Regulations; it alters the annual Supplies value those tests may use after notification.
What the legislation does not determine
Article 9(2) and Article 52(3) do not define “similar or related activities” beyond that phrase. They do not prescribe the form or minimum content of the Authority’s notification, beyond the requirement that there be a notification and a specified duration. They do not set out appeal or objection procedures against such a notification. They do not create a Tax Group; VAT Group treatment, where available, is a separate subject under the Agreement and the Regulations. Voluntary registration under Article 7 and the exclusively zero-rated exclusion under Article 9(1) remain separate rules.
Instruments relied on: Implementing Regulations, ninth edition, 26/11/1444H corresponding to 15/6/2023G, unofficial English translation, Article 9(2) (this paragraph was not amended by the text of ZATCA Board Resolution No. (01-06-24) relied on here); Common VAT Agreement, Articles 1, 50(2) and 52(3), executed in Arabic on 27/2/1438H corresponding to 27/11/2016. The Arabic text prevails.