Zero-rating services supplied to a customer with no Place of Residence in a Member State

A supply of services by a Taxable Person to a customer who has no Place of Residence in any GCC Member State is zero-rated under Article 33(1) of the Implementing Regulations, except in the cases set out in the current Article 33(2). A customer who has a Place of Residence in the Kingdom, or in any other Member State, does not meet Article 33(1). The April 2025 resolution replaced Article 33(2) and added Article 33(3). It did not replace Article 33(1). The new exceptions apply from publication in the Official Gazette. They are not deferred to 1 January 2026.

The Agreement and the domestic criteria

Article 34(1)(d) of the Common VAT Agreement subjects to the zero-rate the supply of Services by a Taxable Supplier residing in a Member State for a customer who does not reside in the GCC Territory and who benefits from the service outside the GCC Territory, in accordance with the criteria determined by each Member State. The same paragraph excepts the cases in Articles 17 to 21 of the Agreement that determine the place of supply as being in a Member State. The criteria enacted in the Regulations are Article 33.

Who has no Place of Residence in a Member State

Article 33(1) of the Regulations, which the April 2025 resolution does not replace, provides that, except as stated in the second paragraph of the Article, a supply of services made by a Taxable Person to a customer without a Place of Residence in any Member State shall be zero-rated. Under the Agreement, the Place of Residence of a Person is the location of the Place of Business or any other Fixed Establishment; for a natural person with neither, it is his usual place of residence; and if a Person has a Place of Residence in more than one State, it is the place most closely connected with the supply. A person is resident in a State if he has a place of residence there. A customer who has a Place of Residence in the Kingdom has a Place of Residence in a Member State. The Kingdom of Saudi Arabia is named as a Member State in the preamble to the Agreement, and “Member State” is defined as any country with full membership of the GCC. Article 33(1) is not satisfied, on those definitions, merely because the customer is outside the Kingdom while resident in another Member State, and it is not satisfied where the customer has a Place of Residence in the Kingdom.

The four cases in which clause (1) does not apply

The current Article 33(2), as set out in Resolution No. (01-06-24), provides that clause (1) shall not be applicable in any of the following cases.

First, if the place of supply of the services is in any Member State pursuant to the special cases listed in Articles 17 to 21 of the Agreement. The current text adds that this does not include services supplied separately from services whose place of supply is located in any Member State in accordance with any of those special cases, to which they may be directly or indirectly related. Articles 17 to 21 concern, respectively, leasing means of transport to a non-taxable customer; Goods and passenger transportation and related Services; Real Estate Related Services; wired and wireless telecommunication Services and electronically supplied Services; and specified services whose place of supply is the place of actual performance, including services linked to transported Goods supplied by a Taxable Supplier residing in a Member State to a non-taxable customer residing in another Member State. The added sentence stands as it is in the unofficial translation. The instruments relied on do not provide a worked illustration of “supplied separately”.

Second, if the customer is a Resident of any Member State.

Third, if the customer or any person related to the customer benefits directly from the same supplied services when such customer or person is situated in a Member State, and the related person is not permitted to deduct the Input Tax on such services in full.

Fourth, if the services are performed in a tangible form in relation to tangible Goods which are located within a Member State during the supply.

The fourth case is the exception for services performed on goods. It is not confined, in its wording, to the Kingdom. It applies where the tangible Goods are located within a Member State during the supply. Goods located in the Kingdom during the supply are, on the Agreement’s definition of Member State and the Kingdom’s status as a named party, goods located within a Member State. The current text requires that the services be performed “in a tangible form” in relation to those Goods. The ninth-edition wording, which did not contain the words “in a tangible form”, has been replaced. The resolution does not define “in a tangible form”.

The tourist-refund exception, and when the new text applies

The third and fourth cases are themselves subject to a new Article 33(3). As an exception to subclauses (c) and (d) of clause (2), services provided by the provider of the tax refund service to tourists, and related to the tax refund, shall be subject to the zero-rate, in accordance with Article 73 of the Regulations. The April 2025 resolution also amends Article 73. The tourist refund scheme is not set out here. Clause (3) does not disapply subclauses (a) or (b).

Article 33(1) continues to open with an exception for the second paragraph only. The new third paragraph then restores the zero-rate for the tourist-refund services described, notwithstanding subclauses (c) and (d). That is the relationship the two texts bear. The resolution does not consolidate them into a single rewritten Article 33(1).

Clause I of the resolution makes the amendments effective from publication in the Official Gazette. Issue 5082 is dated 18 April 2025. Clause III’s deferred commencement of 01/01/2026 applies to Article 47(3), not to Article 33.

What the legislation does not determine

The resolution does not define “performed in a tangible form”, and the instruments relied on do not give an example of a service treated as falling inside or outside those words. Article 33(2) does not define “any person related to the Customer”. The Agreement defines “Related Persons”. The current Article 33(2) does not cross-refer to that definition, and the two expressions are not treated here as identical. The meaning of “benefits from the service outside the GCC Territory” in Article 34(1)(d) of the Agreement is not determined beyond the criteria which Article 33 states. The amended text of Article 73 is not set out, other than the cross-reference in the new Article 33(3). International transport under Article 34 does not impose the Article 33 residence condition.

Instruments relied on: Implementing Regulations, Article 33(1), ninth edition, 26/11/1444H corresponding to 15/6/2023G, unofficial English translation (that paragraph is not replaced by Resolution No. (01-06-24)); Article 33(2) and the new Article 33(3) as set out in ZATCA Board Resolution No. (01-06-24), Official Gazette issue 5082, 18 April 2025, unofficial English translation (the ninth-edition wording of Article 33(2) is not cited as the current text); Common VAT Agreement, Articles 1, 17 to 21 and 34(1)(d), executed in Arabic. The Arabic text prevails.

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