Telecommunications and electronically supplied services: place of actual use under Article 24

Digital and telecommunications services can be supplied from anywhere and consumed anywhere. The Common VAT Agreement therefore does not locate them by reference to the residence of the supplier. Article 20 of the Agreement provides that the place of supply for wired and wireless telecommunication Services and electronically supplied Services shall be the place of actual use of or enjoyment from these Services. Article 24 of the Implementing Regulations defines the services concerned and explains how the place of use or enjoyment is to be identified.

The services within the rule

Article 24(1) provides that wired and wireless telecommunications services and electronic services include, but are not limited to:

• any service relating to the transmission, emission or reception of signals, writing, images and sounds or information of any nature by wire, radio, optical or other electromagnetic systems;
• the transfer or assignment of the right to use capacity for such transmission, emission or reception;
• the provision of access to global information networks;
• the provision of audio and audio-visual content for listening or viewing by the general public on the basis of a program schedule by a person that has editorial responsibility;
• live streaming via the internet;
• supplies of images or text provided electronically, such as photos, screensavers, electronic books and other digitized documents or files;
• supplies of music, films and games, and of programs on demand;
• online magazines;
• website supply or web hosting services;
• distance maintenance of programs and equipment;
• supplies of software and software updates; and
• advertising space on a website and any rights associated with such advertising.

The list is illustrative rather than closed. Software, hosting, streaming and online advertising are expressly included.

Where the customer must be physically present

Article 24(2) provides that where these services are provided at a telephone box, a telephone kiosk, a Wi-Fi hot spot, an internet cafe, a restaurant or a hotel lobby, or in other cases where the physical presence of the Customer at a particular location is needed for the services to be provided, the Customer consumes and enjoys the services at that location. Internet access provided in a hotel lobby in the Kingdom is therefore used and enjoyed in the Kingdom, whatever the customer's home country.

All other cases: the usual place of residence

Article 24(3) provides that in all cases where the second Paragraph does not apply, the Customer consumes and enjoys the service at the place where his usual place of residence is.

Article 24(4) lists indicators that a Supplier may use to determine the Customer's usual place of residence for these services:

• the invoicing address of the Customer;
• the bank account details of the Customer;
• the Internet Protocol address used by the Customer to receive the services; and
• the country code of the SIM card used by the Customer to receive the services.

These are indicators that the Supplier "may use". The Regulations do not prescribe how many must be obtained or how conflicting indicators are to be weighed. Suppliers should document the indicators relied on for each customer so that the determination can be supported if reviewed.

The determination is made at the time of supply

Article 24(5) provides that the place of actual use or benefit is determined based on the circumstances existing at the time of the Supply, and that any subsequent changes to the use of the services received will not affect the determination of the place of Supply. A customer who later travels or relocates does not retrospectively change the place of supply of services already supplied.

Priority and practical consequences

Article 20 of the Agreement is a Special Case. Under Article 22 of the Regulations it takes precedence over the general principles in Articles 15 and 16 of the Agreement. A supplier of electronic services cannot place the supply at its own place of residence, or at the customer's place of residence under Article 16, where Article 20 points elsewhere. Where the Kingdom is the place of actual use or enjoyment and the supplier is not resident in the Kingdom, Article 29 of the VAT Law provides that the Regulations shall determine the mechanism for payment of the tax due.

Instruments relied on: VAT Law, Articles 13 and 29; Common VAT Agreement, Articles 15, 16 and 20; Implementing Regulations, ninth edition, 26/11/1444H corresponding to 15/6/2023G, unofficial English translation, Articles 22 and 24 (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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