Voluntary VAT registration based on supplies or expenses
A Resident Person in the Kingdom who is not required to register under the Agreement and the Law may apply to the Authority for registration where the value of the Person’s Supplies or expenses during the then ended twelve months were equal to an amount not less than the Voluntary Registration Threshold, or where that value is expected to be not less than the Voluntary Registration Threshold within the following twelve months. Under the Agreement, the Voluntary Registration Threshold is 50% of the Mandatory Registration Threshold, and the Mandatory Registration Threshold is SAR 375,000. The Authority may agree to deem voluntary registration effective from an earlier or later date than the prescribed effective date if the Person is eligible from that date.
Who may apply under Article 7
Article 7(1) of the Implementing Regulations provides that a Resident Person in the Kingdom who is not required to register under the Agreement and the Law may apply to the Authority for registration in any of the following cases: (a) the value of the Person’s Supplies or expenses during the then ended twelve months were equal to an amount not less than the Voluntary Registration Threshold; (b) the value of the Person’s Supplies or expenses is expected to be not less than the Voluntary Registration Threshold within the following twelve months.
Voluntary registration is therefore available only to a Resident Person who is not already required to register under the mandatory rules. The test may be satisfied by reference to Supplies or to expenses, on either a historic twelve-month basis or an expected twelve-month basis. The statutory phrasing is “not less than the Voluntary Registration Threshold,” not a separate invented monetary figure.
The Voluntary Registration Threshold under the Agreement
Article 51 of the Common VAT Agreement addresses Voluntary Registration. Article 51(1) provides that a Person who is not required to be registered under Article 50(1) of the Agreement who resides in any Member State may request to be registered therein, provided that the value of his annual supplies in that Member State is not less than the voluntary registration threshold. Article 51(2) provides that a Member State may allow registration provided that the annual expenses of a person who is not obliged to register in that State exceed the Voluntary Registration Threshold in accordance with the conditions and rules determined by that State. Article 51(3) states that the Voluntary Registration Threshold is 50% of the Mandatory Registration Threshold.
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. Reading Article 51(3) with Article 50(2), the Voluntary Registration Threshold is half the Mandatory Registration Threshold of SAR 375,000 under the Agreement. Article 7 of the Regulations uses the term Voluntary Registration Threshold and does not restate a separate Kingdom-specific figure in the text relied on here.
Calculation and effective date flexibility
Article 7(2) of the Regulations provides that, for the purposes of Voluntary Registration, the annual value of Supplies or expenses of a person shall be calculated in accordance with the provisions of the Agreement and the Law.
Article 7(3) provides that the Authority may, upon request for registration by an applicant, agree to deem such registration effective from an earlier or later date to the prescribed effective date provided the Person is eligible to be registered from that date. That flexibility is similar in concept to Article 6(2) and (3), but it is stated separately for voluntary registration under Article 7(3).
Distinction from mandatory registration
Mandatory registration for a Resident Person is governed by Articles 3 and 4 of the Regulations and Article 50 of the Agreement, by reference to the Mandatory Registration Threshold of SAR 375,000. Article 7 applies only where the Person is not required to register under the Agreement and the Law. A Person who already meets a mandatory test does not fall within the opening words of Article 7(1).
What the legislation does not determine
The instruments relied on do not record whether the Ministerial Committee has amended the Mandatory Registration Threshold of SAR 375,000, and therefore do not record any consequential change to the half-threshold relationship in Article 51(3). Article 7 does not itself prescribe the default effective date of voluntary registration beyond the Authority’s power under Article 7(3) to agree an earlier or later date. It does not set out deregistration after voluntary registration, nor the exclusively zero-rated election under Article 9(1) of the Regulations and Article 50(4) of the Agreement. Those subjects are governed by the provisions that address them.
Instruments relied on: Implementing Regulations, ninth edition, 26/11/1444H corresponding to 15/6/2023G, unofficial English translation, Article 7 (this Article was not amended by the text of ZATCA Board Resolution No. (01-06-24) relied on here); Common VAT Agreement, Articles 50(2) and 51, executed in Arabic on 27/2/1438H corresponding to 27/11/2016; 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). The Arabic text prevails.