The preliminary provisions section describes the processing rules for the statue for the Saudi’s Value Added Tax. This section is giving the main rules that the Value Added Tax depends on them in the statue. That include many things like the authority, the law, the territory, the board of directors, and the definition for some words that would be used in the statue . All the statues in the Kingdom of Saudi Arabia or any other country have the same thing because it gives an introduction to the statue and gives the main rules for it.
This section explained that the Value Added Tax statue is an extend form the Gulf Cooperation Council’s agreement for the Value Added Tax, so all the rules in this statue are compatible with the agreement. Also, it covered the territory that this statue will be applied because it would be known where the statue will be applied and where it won’t be applied. The territory for the Value Added Tax is the territory of the Kingdom of Saudi Arabia, so that includes the water that located outside the territorial of the Kingdom that the kingdom has a right on it. Also, this section give the definition for some world that will be used in the statue like; the board of direct which is the council that will have control in the Value Added Tax processing, the output of the tax which is ‘the tax due and chargeable on any Taxable supply of goods or services made by a taxable person”, and the tax invoice which is “an invoice issued in respect of taxable supplies in accordance with the requirements set out in the law and the regulation”. The statue was clear by explaining when the tax will be applied and when it will not be by applied because the article tow which is “Tax shall be imposed on the import and supply of Goods and Services in accordance with the provisions stipulated in the Agreement, the Law and the Regulations .
As the Value Added Tax’s statue has been giving the authority to the General Authority of Zakat and Tax to control everything related to the Value Added Tax . There is an issue about the General Authority of Zakat and Tax so will be explained.
The General Authority of Zakat and Tax in the Kingdom of Saudi Arabia is responsible about collecting Zakat and other taxes that are applying the Kingdom of Saudi Arabia. There are other taxes that the General Authority of Zakat and Tax is responsible about them beside the Value Added Tax like Zakat, income tax, selective taxes (Tax, 2018). Giving the authority for different taxes to one authority is something might affect the outcome of the tax. This is because the authority won’t be able to control many taxes in the same time even if they have the best technology and team. The Value Added Tax is a new tax in the Kingdom of Saudi Arabia especially that this tax will be dealing will people and companies at the same time. Most of the other tax in the Kingdom of Saudi Arabia deal with companies and s small percentage of people. Also, the Value added Tax is a tax on the goods and services, so it needs an authority that able to control it and have enough knowledge about the Value Added Tax. It is hard for the general Authority of Zakat and Tax because it is different from what they have been dealing with the other taxes in past.
Giving the authority for the Value Added Tax to the General Authority of Zakat and Tax acceptable for the beginning of the Value Added Tax until the government establish a new authority for the Value Added Tax. The government will be required to update the statue if they are planning to establish a new authority for the Value Added Tax in the future. This is because the statue already gave the authority to the General Authority of Zakat and Tax, so changing the authority require changing the statue. Sometimes, the government gives the authority to a judiciary that will be established in the future. During the time between the starting of the statue and the new authority, the statue will give the authority to another judiciary in the government. The Saudi’s statue for the Value Added Tax did not mentioned that will be a separate authority which will control the Value Added Tax in the future, so that means the statue has to be update if the government decided to give the authority for the Value Added Tax to separate authority in the future.
There are four kinds of taxes that the General Authority of Zakat and Tax is responsible about them which are; Zakat, Income Tax, Selective Tax, and Value Added Tax. Each kind has different process that is not related to the other tax and tax’s benefit. Zakat, it is a tax that considered as an Islamic tax and controlled by the General Authority of Zakat and Tax. The General Authority of Zakat and Tax gives the income to the Ministry of Islamic Affairs, Dawah and Guidance because they are responsible about Zakat. Income Tax, is a tax that being collected from company and certain people from their income. the General Authority of Zakat and Tax gives the authority to the Ministry of Finance, so they spend it on the need of the government. Selective Tax, is a tax that the General Authority of Zakat and Tax applies on selective goods that are unhealthy, so the General Authority of Zakat and Tax collected it and give it to the Ministry of Finance. Value Added Tax, is a tax that applies on the goods and services, so the General Authority of Zakat and Tax collected and give it to the Ministry of Finance (Tax, 2018).
By knowing the definition and benefit for each one of the taxes, there will be a chance to separate them in different authorities that make the outcome of these taxes better. The Ministry of Islamic Affairs, Dawah and Guidance is the authority that spending the outcome of Zakat after the General Authority of Zakat and Tax collected it. In that way, The Ministry of Islamic Affairs, Dawah and Guidance should be responsible about Zakat because that will make it easier, faster, and make all the Zakat’s processes under The Ministry of Islamic Affairs, Dawah and Guidance. Income Tax, should be under the Ministry of Commerce and Investment because they are the authority which dealing with the companies in general. They are the authority who give the license to the companies and people who are required to pay income tax. In that way, the processes for the income tax will be more professional especially it deals with companies. Selective Tax, the Saudi Food & Drug Authority should be under the selective Tax because it is the authority which gives the approve for all the foods and drugs in the Kingdome of Saudi Arabia. The Saudi Food & Drug Authority have more knowledge about these goods that the selective tax applies on them than the General Authority of Zakat and Tax, so they will be able to collect the selective tax from people and companies. At that time, Value Added Tax will be in a separate authority that only deals with the Value Added Tax. That will make the authority being able to control the Value Added Tax in a professional way. This is because, Value Added Tax is considered as a complicated tax even for the expertise. Also, it deals with companies and people at the same time and applies on most of the goods and services in the Kingdome of Saudi Arabia.
Most of the countries around the world have a different way of naming the authority for Value Added Tax. The government in the Kingdom of Saudi Arabia mentioned the name for the authority that is responsible about Value Added Tax, while other governments did something different. The Value Added Tax’s statue in Australia, India, Japan, and New Zealand have not mentioned any authority that responsible about Value Added Tax. These countries explained everything related to the Value Added Tax in the statues, but they have not given the authority to a specific authority or ministry . This is because the governments will have the ability to name the authority after establishing the statue and will have the ability to change the authority in the future. By making the authority unknown, the government will not need to update or establish a new statue because the authority’s name is not mentioned.
– Taxable Persons
The taxable person in the Saudi’s Value Added Tax is “A person that conducts an Economic Activity independently for the purpose of generating income, who is registered or obligated to register for VAT according to the Agreement” (tax, 2018).
The taxable person can be a person or business who is practicing any kind of business activities in the Kingdom of Saudi Arabia. There are many elements that the person or business has to have them to make them required to register for Value Added Tax. The Saudi’s regulation for Value Added Tax has explained when the person or business is required to register or not. These conditions can be related to the kind of business or the worth of the business’s activity. Also, The Saudi’s regulation for Value Added Tax explained when the registration for the Value Added Tax is mandatory, voluntary, or not required (Norré, 2017).
* Taxable Persons required to register:
The Saudi’s Value Added Tax’s registration in the processes that the taxable person weather a person or business has to do to be enrolled in the Value Added Tax’s authorization. When the person or business register, the will get an account number that represents them in the authority and consumer (tax t. g., 2018).
> Mandatory and Voluntary registration
The Value Added Tax’s mandatory registration is the person or business has to register before the deadline that the authority has given or during the start of the business activity. All the business activities that equal 1,000,000 SAR are legally required to register for Value Added Tax before 20th December 2017. There are an exceed from the Mandatory Registration which are the business activities that equal from 375.00 SAR to 1.000.000 SAR, but this an exceed is only for the year of 2018. By the date of 20th December 2018, these business activities are required to register for Value Added Tax. The non-residents, are the persons or business “who carry on economic activities but have no fixed place of business or fixed establishment in the Kingdom of Saudi Arabia”. They are required to register for the Value Added Tax if they object to the mandatory registration. Also, the taxable person has to have a tax representative that is approved from the General Authority for Zakat and Tax. All the registration for Value Added Tax should be throughout the General Authority for Zakat and Tax (tax t. g., VAT Registration, 2018).
Voluntary registration is a registration that optional for the person or business which are practicing and kind of business activities. The authority for Value Added Tax on the Kingdom of Saudi Arabia has been giving the decision for the Value Added Tax’s registration for all the business activities that worth 187.000 SAR or lower. The benefit that the person or business will get from registration is the deduction of the input tax (tax t. g., 2018).
The Saudi’s regulation for Value Added Tax has discussed everything related to mandatory and voluntary registration in a way that doesn’t effect on the Gulf Cooperation Council’s agreement for Value Added Tax. In second article, the regulation explained when the person is considered as a taxable person by conducting independently any economic activities for the purpose of generation an income. Also, in the third article, the regulation explained when the non-residents person is required to register by giving them 30 days to register if the business activities reached the mandatory registration’s level. While the regulation in the fourth article requests the person, who is not required to requester to check each month estimate of the value of his annual Supplies to be made in the next twelve months, so to make sure that the person is still under the level of the mandatory registration. Furthermore, in the fifth article, the regulation gives the non-residents taxable persons 30 days to register for the Value Added Tax from the first supply on which the person was obligated to pay the Value Added Tax .
The Australian’s statue for Goods and service has explained the mandatory and voluntary registration. The mandatory registration is required for the person or business which carry an enterprise. The worth for the enterprise should be 50.000 AUD or higher of the goods and services. The non-profit body, the mandatory registration is required if the worth of the goods and services is 100.000 AUD or higher. For voluntary registration, the person or business has the option for register or not in some cases. These cases are, if the person or business is plaining to start a business that might be worth the level of the mandatory registration, and if the non-profit body is between 50.000 and 100.000 AUD. The Australian’s statue for Goods and service gives the person or business who is required to register 21 days to register starting from the first day of being required to register . The statue is simple because it gives the different between the mandatory and voluntary registration. Also, the statute requires the non-profit body to register if the business is higher than 100.000 AUD which is something that most of the countries don’t do it. Most of the times, non-profit businesses are not required to register because they don’t have an interest in profit and most of the times they are doing these businesses for the benefit of the society.
The Indian’s statute for the goods and services tax has explained the mandatory and voluntary registration. The Statute requires person and business to register if the supply of goods and services in the country or the union territory exceed 20 Lakh Rupees -27,346 USD- in a financial year. Also, the mandatory registration is required if the supply of goods and services from other countries are more than 10 Lakh Rupees -13,673 USD- in a financial year. Furthermore, the statute doesn’t require any person or business to register in some cases like; any person engaged exclusively in the business of supplying goods or services or both that are not liable to tax, and an agriculturist. The Indian’s statute for the goods and services tax gives the person or business who is required to register 30 days to register starting from the first day of being required to register . The Indian’s statute for the goods and services tax supports the business inside the country by not requiring them to register unless if the business’s goods and services worth 20 Lakh Rupees -27,346 USD-. Also, requiring the businesses from other countries which worth 10 Lakh Rupees -13,673 USD- of goods and services can give the people in India the chance to start businesses without getting effected by the foreign companies and products.
The Japanese’s consumption tax is requiring the mandatory registration for all the businesses which worth 10 million JPY of goods and services. The businesses that have a turnover lower than 10 million JPY are not subject to the registration of consumption tax. At the time of the revision in 2003, the turnover for the consumption tax was mandatory for the businesses which worth 30 million JPY or higher, so the businesses that have a turnover lower than 30 million JPY was excepted from consumption tax. This is because the beginning of the consumption tax . The Japanese’s consumption tax doesn’t have a mandatory and voluntary registration as other countries. This is because the Japanese’s consumption tax is requiring the registration for the businesses or people who are dealing with the goods and services that subject to consumption tax. The statute put a limit of worth that the consumption tax will be applied if the business or person reach it. At the same time, the statute explained the goods and services that will be exempted from the consumption tax. This strategy makes the consumption tax easier to be understandable for the businesses and people.