KSA Excise Tax Rules

Payment or payments received for the use of or the right to use intellectual rights, including, but not limited to, copyright, patents, designs, industrial secrets, trademarks and trade names, know how, trade and business secrets, goodwill, and payments received against the use of information related to industrial, commercial or scientific expertise, or against granting the right to exploit natural and mineral resources.

The International Agreement

The Multilateral Convention for Mutual Administrative Assistance in Tax Matters, any bilateral or multilateral tax convention, or any tax information exchange agreement to which the Kingdom is a party and pursuant to which jurisdictions commit to the mutual exchange of tax information, including automatic exchange of information.

Qualifying Competent Authority Agreement

Means an agreement that is between authorized representatives of the jurisdictions that are parties to an international agreement pursuant to which the jurisdictions are required to automatically exchange CbC reports.

The Unified Agreement

The term denotes one of the two conventions listed below:

The Unified Agreement for VAT of GCC, which was published on April 21, 2017.
The Unified Agreement for Excise Tax of GCC, which was published on May 26, 2017.

TIR Convention

Formally Convention on the International Transport of Goods Under Cover of TIR Carnets,facilitating the international carriage of goods by road vehicle, contracting parties apply a simplified and harmonized set of administrative formalities in international road transport.

Kyoto Convention (Customs)

Under the WCO glossary of international customs terms this term means the expression commonly used to refer to the international convention on the simplification and harmonization of customs procedures adopted by the Customs Cooperation Council in Kyoto in 1973.

ATA Convention (Convention ATA)

The expression commonly used to refer to the customs convention on the ATA carnet for the temporary admission of goods (ATA Convention) adopted by the Customs Cooperation Council in Brussels in 1961.

Double Taxation Agreements

It is the set of international agreements concluded between Saudi Arabia and other countries for the purposes of avoiding double taxation and charging a taxpayer with double taxation in two contracting countries for the same income, profits, or evasion of income/capital tax.

Exchange of Information Agreements

Agreements concluded between Saudi Arabia and other countries to improve international tax compliance, which provides for the exchange of financial accounts information on a regular basis.

The Actual Pay/Wage

The base pay/wage plus all other accrued increases determined for the employee in exchange for an effort made by him at work, or risk in the performance of his work or which the employer decides for the work performed under the employment contract or the employment regulation system.

Customs Warehousing Procedure

A customs procedure under which imported goods are stored under customs control in a designated place (a customs warehouse) without payment of import duties and taxes.

Customs Formalities

All the operations which must be carried out by the persons concerned and by customs in order to comply with the customs law.

Assessment and Examination Procedures

ZATCA has the right to conduct assessment and examination procedures to make sure that the taxpayer has fulfilled the obligations imposed on him by the income tax law, and to correct or amend the tax indicated in his declaration to make it compatible with the provisions of the law. The taxpayer is obligated to cooperate with ZATCA inspectors by providing them with all information and documents upon their request. Inspectors have the right to make a tax assessment if the taxpayer does not submit his declaration.

Reverse Charge Mechanism

The mechanism by which the taxable customer is obligated to pay the tax due on behalf of the supplier, and he is also responsible for all the obligations provided for in the agreement (the Unified Agreement for VAT of the GCC) and the local VAT law and its applicable regulation.

Commercial Fraud

Any offence against statutory or regulatory provisions which customs is responsible for enforcing, committed in order to:

Evade, or attempt to evade, payment of duties/ levies/taxes on movements of commercial goods; and/or
evade, or attempt to evade, any prohibition or restrictions applicable to commercial goods; and/or
receive, or attempt to receive, any repayments, subsidies or other disbursements to which there is no proper entitlement; and/or
obtain, or attempt to obtain, illicit commercial advantage injurious to the principle and practice of legitimate business competition.

Transitional Rules

It is a set of statutory provisions that provide specific exceptions that are applied during the transitional period resulting from the issuance or amendment of any of the laws, regulations, tax or zakat instructions.

Temporary Admission

Goods shall be temporarily admitted without collection of customs duties and taxes or restrictions and bans on import.

ATA Carnet (Carnet ATA)

An international customs document which, issued under the terms of the ATA convention and the Istanbul convention, incorporates an internationally valid guarantee and may be used, in lieu of national customs documents and as security for import duties and taxes, to cover the temporary admission of goods and, where appropriate, the transit of goods. It may be accepted for controlling the temporary exportation and reimportation of goods but, in this case, the international guarantee does not apply.

OECD Transfer Pricing Guidelines

The OECD Transfer Pricing Guidelines for Multinational Enterprises and Tax Administrations for the year 2017.

Basis Of Zakat Calculation

The calculation of zakat of existing companies is generally based on the overall accounting principles and standards, as the concepts of the accounting standards applicable to zakat can be applied to companies that prepare financial statements according to the accounting principles observed in Saudi Arabia, while verifying that the zakat payer complies with the standard of presentation and disclosure and accuracy of such disclosures, such as the distinction between fixed assets and current assets, with the addition of certain requirements relating to increased disclosure of the entity, such as the type of investments owned by the entity, and whether or not they are subject to zakat, as they do not appear in the financial statements, but they are necessary for the purpose of forming the zakat base.

Appeal

When the person who is issued with a decision or judgment appeals to the committee for settlement of violations and tax disputes or to the competent judicial authority within the specified period.

Permanent Taxable Usage

It refers to the portion of taxable usage arising following the permanent change of use from the sale or disposal of a capital asset. The permanent taxable usage of a taxable sale of a capital asset is 100%.

Drawback

An amount of import duties and taxes repaid under the drawback procedure.

Consumption of Services

Is a term used to determine the place where a customer receives and makes actual use of a supply of services provided to him.

Importation

The act of bringing or causing any goods to be brought into a customs territory.

Import of Goods

The entry of goods into any member state from outside the GCC Territory in accordance with the provisions of the Unified Common Customs Law.

Import of Excise Goods

The entry into the kingdom of excise goods which are not subsequently placed under a customs suspension arrangement besides customs clearance and release of excise goods for import purposes in Saudi Arabia.

Tax Refund

It is a refund request submitted by the taxpayer himself, or whoever acts on his behalf by an official power of attorney. After that ZATCA evaluates the taxpayer's request and ensures that there are overpaid amounts, then processes the refund within thirty days from the date on which ZATCA received the application.

Identifying Name

Means a name other than the legal name of a person that could identify a person. This includes names used in the ordinary course of business or used in conducting business activities such as tradenames.

Related Persons

Two or more persons, where one of them has the authority to direct and supervise others so that he has administrative authority that enables him to influence the work of other people financially, economically, or organizationally, and that includes persons under the authority for a third party which enables him to influence their work financially, economically, or organizationally.

Independent Persons

Persons that are not related persons or persons under common control.

Debit Notice

A commercial document issued by the supplier or the seller to the buyer, as a document that proves the increase in the buyer's debt due to the seller or the supplier. It is useful for the purposes of value added tax, and the adjustment.

Credit and Debit Notes

Commercial documents issued by a supplier/seller to a buyer, required by law to evidence a subsequent change to consideration of a taxable supply whether reducing its value (credit note) or increasing it (debit note).

Assets

Things that have earning power or some other value to their owner.

Capital Assets

Material and immaterial assets that form part of a business's assets allocated for long term use as a business instrument or means of investment.

Material (tangible) Assets

Represent assets that have a physical form. Tangible assets include both fixed assets such as machinery, buildings and land and current assets such as inventory.

Trust Assets

Assets held on trust and managed for a specific purpose. Trust assets may include both monetary assets and non-monetary assets.

Intangible Asset (Non-Material)

An identifiable non-monetary asset without physical substance.

Re-Importation

Means importation into a customs territory of goods previously exported from that territory.

Re-Exportation

Means exportation from a customs territory of goods previously imported into that territory.

Business Restructuring

Means a crossborder or domestic reorganization of the commercial or financial relations between related persons, including the termination or substantial renegotiation of existing arrangements.

The Objection

A formal objection made to the relevant committee or judicial body by a taxable person to an assessment or decision issued by the Authority.

Relief from Import Duties and Taxes

Means clearance of goods for home use free of import duties and taxes, irrespective of their normal tariff classification or normal liability, provided that they are imported in specified circumstances and for specified purposes.

Exemption Related to Imports

Excise goods imported by travelers coming to Saudi Arabia along with their personal luggage are exempt from the tax if the goods are exempt from customs duties under the unified customs law.

Releasing

Taking the excise goods out of the suspended status to the taxation status, and from the tax depository to the markets to be available for customers.

Single Transitional Excise Return

A form of excise tax return filed by a holder of excise goods. The return is filed only once with respect to the inventory as of the date of implementation of the excise tax scope expansion. The return is filed to declare and pay the tax due on excise goods held.

Customs Declaration

The goods declaration or the declaration submitted by the importer or his representative describing the elements identifying the declared goods and quantity thereof in details according to the provisions of this law.

Customs Declaration For Travelers

It is a form submitted by the traveler upon entering or leaving the Kingdom of Saudi Arabia in which he declares about a group of items that must be declared, such as coins and jewelry whose value reaches 60,000 SAR or more, as well as purchases whose value exceeds 3,000 SAR or more, as well as goods subject to excise tax, goods and materials prohibited and restricted.

Zakat Declaration

A form issued by zakat, which contains a number of elements and items that must be filled out and submitted by each zakat payer. The purpose of the declaration and its submission is to indicate the amount of zakat base of the entity and to enable the Authority to make the assessment in accordance with the declaration data. The types of declaration are:

Type I: A declaration of the zakat payer who maintains commercial books and statutory accounts, and issues financial statements consistent with statutory
Type II: A declaration of the zakat payer who is accounted for on a deemed basis and does not maintain commercial books and statutory accounts.
Type III: Information declaration for the zakat payers exempted from a zakat levy, or a subsidiary that was consolidated and zakat was paid per the holding company’s consolidated declaration, or united consortium / consortia. Such zakat payer must provide a declaration that includes the disclosure of its data.

Tax Returns

Represents the information and data specified for tax purposes and submitted by a taxable person or a person authorized to act on his behalf for each tax period in accordance with the form prescribed by the Authority.

Commitment

It is the fulfillment of all the obligations, tasks, and duties imposed on the taxpayer or the person subject to tax as per laws, regulations and bylaws issued by ZATCA.

Compliance

Voluntary compliance with the provisions of laws, regulations, and bylaws for zakat or tax.

Funds Subject to Zakat

Any funds resulting from any business established for the purpose of earning money, whether it is commercial, industrial...etc.

Production of Excise Goods

Any activity in Saudi Arabia involving the manufacture, cultivation, or changing of components of excise goods to the extent that makes it subject to tax.

Revenue

The amount received by a producer from the sale of goods and services (the product of market price and quantity sold).

Deregistration

It is the request submitted by the taxpayer to cancel his registration once he stops practicing any of the activities that require registration, or if the registration requirements are no longer applicable in accordance with the relevant laws, regulations, and instructions.

Identical Goods

They mean goods that are similar in all respects, including physical characteristics, quality and goodwill. Minor differences in appearance would not preclude goods otherwise conforming to the definition from being regarded as identical.

Similar Goods

They mean goods, although not similar in all respects, have similar characteristics and material components facilitating the performance of its functions and have an interchangeable commercial nature. The quality, goodwill and trademark of goods are among the factors to be considered in determining whether goods are similar.

Eligible Used Goods

Goods prescribed by ZATCA as eligible for calculating VAT based on profit margin.

Imported Goods being Valued

The goods being valued for customs purposes.

Restricted Goods

Means any goods the import or export of which is restricted under the provisions of the Common Customs Law for GCC states or any other law.

Prohibited Goods

Any goods the import or export of which is prohibited under the provisions of the Common Customs Law for GCC Countries or any other law.

Heavy or Bulky Goods

Any heavy or bulky object, which due to its weight, size or nature cannot be normally carried in a closed road vehicle or closed container.

Free Goods

Goods which are required to undertake normal customs formalities on import or export but on which no customs duty is paid.

Bond Card

A card issued by a guarantor or surety proving the carrier is covered by a bond hereunder according to the provisions of the agreement on the regulation of "Transit" transport among Arab League countries.

Bill Of Lading

A "Bill of Lading" is a legal contract that serves three major functions. It is:

a receipt for goods
a document of title;
evidence of a contract for the carriage of goods. It is a document which is prepared and issued by a shipping company when goods under export are shipped by sea. B/L serves several purposes:
it is taken as evidence that the shipping company has taken the control of goods and placed on the vessel for transporting by sea from the port of exporting country to the importing country without unloading and tampering with during the voyage;
it is a receipt for goods shipped and provides certain details such as number of packages, marks and numbers, broad description of the goods, vessel's name, port of shipment, amount of overseas freight and the condition of the goods when placed on board;
it is also a document of title, which means that the company to whom the goods are addressed for delivery in the importing country, has the right to possess the goods;
Date of bill of lading is generally considered as the date of export. Thus, it is as equally an important document as the commercial invoice and as such it should be checked thoroughly and carefully. If there is any unauthorised change either in respect of packages, description, date of issue etc., shipping company should be contacted to confirm the true facts.

Bill Of Lading Trans Shipment

This type of B/L is slightly different from a standard bill of lading in that it names intermediate ports as well as the terminal ports, and usually shows the name of the subsequent vessel that is expected to carry out the next part of the voyage. Normally, the entire overseas freight costs from the original port of export to final destination are collected by the first shipping company, who then passes on an agreed proportion to the next shipping company.

Transit Permit

The full statement that shall be submitted upon every transit process in the country where the process starts.

Customs Declaration

Is defined in the Common Customs Law as: “The goods declaration or the declaration submitted by the importer or his representative describing the elements identifying the declared goods and quantity thereof in details according to the provisions of Common Customs Law'.

Manifest

A document containing a full description of the goods carried on the various means of transport.

Cargo Declaration

Information submitted prior to or on arrival or departure of a means of transport for commercial use that provides the particulars required by the Authority relating to cargo brought to or removed from the customs territory.

Off Plan Sale

Sale or lease of a detached real estate unit before its construction is completed.

Tax Due Tax

Tax becomes due on the date of the supply of goods and services, the date of issuance of the tax invoice or upon partial or full receipt of the consideration, whichever comes first, and to the extent of the received. This date may differ from the date the goods or services are actually provided.

Date of Registration

Is the date when the registration of a person who registers under the provisions of the KSA VAT Law and Implementing Regulations takes effect, or as otherwise specified on the tax registration certificate issued by the Authority.

Release of Goods

The action by customs to permit goods undergoing clearance to be placed at the disposal of the persons concerned.

Temporary Storage of Goods

Storing of goods under customs control in premises and enclosed or unenclosed spaces specified by the customs (temporary stores) pending lodgement of the goods declaration.

Clearance

The accomplishment of the customs formalities necessary to allow goods to enter home use, to be exported or to be placed under another customs procedure.

Customs Clearance

Documentation of the customs declarations for the imported, exported and transit goods according to the customs procedures.

Post Clearance Audit

The structured examination of a business's relevant commercial systems, sales contracts, financial and non-financial records, physical stock and other assets as a means to measure and improve compliance.

Estate

Assets of a deceased natural person or persons. The estate may include both monetary and non-monetary assets.

Transfer Pricing

Setting prices for controlled transactions, including but not limited to the transfer of goods and services, loans, tangible and intangible assets, and the distribution of expenditures and profits.

Arm's Length Pricing

The pricing of a service/ goods/capital loan or intangibles which two or more independent enterprises determine according to market forces and independent transaction conditions.

Administrative Settlement of a Customs offence

Under the WCO glossary of international customs terms this term means the procedure laid down by national legislation under which the customs are empowered to settle a customs offence either by ruling thereon or by means of a compromise settlement.

Compromise Settlement

An agreement under which the customs, being so empowered, consent to waive proceedings in respect of a customs offence subject to compliance with certain conditions by the person(s) implicated in that offence.

Correction

A notification made to the Authority by the taxable person in relation to an error or incorrect amount made in a filed tax return, for the purpose of correcting the tax return.

Export of Goods

Supply of goods from any member state to outside of the GCC Territory in accordance with the provisions of the Common Customs Law, during the transitional period, an export of goods includes goods exported to any place outside of KSA territory.

Transaction

The tendency of the will to have a specific legal effect, and this effect is represented by the creation of a right that results from it. For example, the contracts concluded with the transfer of ownership of real estate between two parties, as it is a legal act based on the convergence of two wills, and a system that acquires real rights. The same applies to the will, as it is a legal act based on a unilateral will, and it also acquires specific rights.

Real Estate Transation

Any legal disposition that transfers the ownership of the property, or its possession for the purpose of owning it, or possession of its benefit, including without limiting the contracts that consist of transferring the beneficial rights or long term lease rights, such as: sale, compensation, donation, bequest, swap, lease, finance lease, and transfer of shares in real estate companies, or usufruct right determination for a period of more than 50 years.

Electronic Notes

Debit and credit notes that must be issued in accordance with the VAT Law and its Implementing regulation, and which are issued in a structured electronic format through electronic means. Paper notes that are converted into electronic format through copying, scanning, or any other method, are not considered electronic notes for the purposes of this regulation.

Customs Tariff

Means the nomenclature containing the descriptions of the goods and the respective taxes and customs duties as well as the rules and notes of the kinds and types of goods.

Offset Compensation

Any condition or undertaking that promotes local development or improves balance of payments regarding any party such as use of local content, technology licenses, investment, counter trade and similar procedures.

Tax Installment

Paying the tax due in partial installments when a taxpayer faces difficulties in paying the amounts due in full, installments are paid according to a schedule approved by ZATCA after making a down payment by the taxpayer.

Restriction of Goods

A legal requirement by law for the submission and approval of an application or other document (other than for customs purposes) as a prior condition to importation or exportation.

Assessment

An assessment of a taxable person's net tax due is made either by a taxable person upon submitting the tax return or by the Authority in any other circumstances.

Assessment of Duties and Taxes

A determination of the amount of duties and taxes payable.

Packing Costs

The cost of all containers (excluding instruments) and coverings of whatever nature and of packing, whether for labor or material, used in packing the goods for shipment.

Tax Evasion

All actions taken for the purpose of avoiding tax payments, in whole or in part, or performing actions that would unlawfully result in a tax refund.

Smuggling

Means the importation or attempted importation of goods with intent to defraud the revenue.

Customs Fraud

Any act by which a person deceives, or attempts to deceive customs and thus evades, or attempts to evade, wholly or partly, the payment of duties and taxes or the application of prohibitions or restrictions laid down by customs law or obtains, or attempts to obtain, any advantage contrary to customs law, thereby committing a customs offence.

Supply

Any form of supply of goods or services for consideration in accordance with the cases provided for in Chapter Two of [the Unified VAT] agreement.

Underlying Supply (of goods or services)

The goods or services supplied by a seller (supplier) and ultimately received by the end customer.

Continuous Supply

The provision of goods or performance of services continuously across a defined period.

Intra GCC Supplies

Goods or services supplied by a supplier residing in a member state of the GCC to a customer residing in another member state.

Reverse Charge Supplies

Supplies on which the customer is obliged to pay the VAT due under the reverse charge mechanism.

Taxable Supplies

Supplies on which the tax is imposed, either in the standard rate or at the zero rate with deducting the associated input tax, in accordance with the provisions of The Unified Agreement for VAT of GCC, VAT law, and its implementing regulation.

Zerorated Rated Supplies

Taxable supplies with VAT charged at the 0% rate.

Exempt Supplies

Supplies on which the tax is not charged, and the associated input tax is not deducted, in accordance with the provisions of the Unified Agreement for VAT of the GCC, the VAT law, and its implementing regulation.

Expansion of the Excise Tax Scope

Any change to the excise tax legislation or any issuance of decisions in the Kingdom which results in additional categories of goods becoming subject to tax.

Collection of Zakat

The State represented by ZATCA, shall calculate the zakat of funds subject to the zakat, collect such funds from the zakat payers subject to it, and transfer to the Social Security Agency for disbursement to the beneficiaries of social security.

Customs

Under the WCO glossary of international customs terms this term means the government service which is responsible for the administration of customs law and the collection of duties and taxes, and which also has the responsibility for the application of other laws and regulations relating to the importation, exportation, movement or storage of goods.

Entities and Projects of Public Benefit

The bodies and institutions that bear this capacity under the system of associations and civil institutions. The system of civil societies and institutions has defined those bodies as those carrying general purposes such as humanitarian, social, cultural, professional and scientific purposes that they seek to achieve through community service.

Holder of Excise Goods

Any person who is in the possession of excise goods (the holder of excise goods is not necessarily the owner).

Container

A type of transport equipment such as a truck equipped with a crane, portable tank, or other similar structures.

Optional Registration Threshold

The actual minimum value of supplies according to which a taxpayer can register for VAT purposes, if his annual revenue is between 187,500 - 375,000 SAR.

Domestic Traffic

The transport of goods carried within the territory of a State for discharge in a place within the territory of the State itself.

Calculating Zakat on Establishments

The zakat payable by an establishment is decided by filling out the zakat declaration for ZATCA, after that the amount of zakat due to the establishment will appear on the system based on the declaration submitted, zakat due is (2.5%) from the zakat base, and the zakat base consists of the total funding sources, after deducting the fixed assets and its equivalent.The Authority calculates the zakat base according to the following rule:

Zakat base + total sources of funding - fixed assets and its equivalent.

Tariff Quota

Means any preset value or quantity, authorized for importation or exportation of given goods, during a specified period, with a reduction of the customs duties, and beyond which any additional quantity of these goods can be imported or exported by paying normal customs duties.

Right of Usufruct

A tangible right that entitles the beneficiary to access the property of others, and to utilize it. This right is established by the approval of the parties, or by the law, and it can be restricted for a specific term or condition.

Mandatory Registration Threshold

The minimum actual value of supplies according to which a taxpayer becomes obligated to register for VAT purposes, if his annual revenue exceeds 375,000 SAR.

Ownership Right

The right that entitles its owner to use all the rights to a tangible thing in a specific way, whereby the owner of the right can monopolize all the benefits, including the right to use, exploit, and dispose of it.

Intellectual Property Rights

Means the following rights:

Copyright and related rights;
trademarks: any sign, including words, names, letters, numerals, figurative elements and combinations of colours, or combinations of these used by a manufacturer or merchant to identify its goods and distinguish them from those manufactured or sold by others;
geographical indications, which identify a good as originating in the territory of a state, or a region or locality in that territory, where a given quality, reputation or other characteristic of the good is essentially attributable to its geographical origin;
industrial designs;
patents which shall be available for any inventions, whether products or processes, in all fields of technology, provided that they are new, involve an inventive step and are capable of industrial application;
layout design (topographies) of integrated circuits: either a protected layout design or an integrated circuit in which a protected layout design is incorporated;
Protection of undisclosed information such as trade secrets and other business confidential information.

Notes:This term is defined by the World Intellectual Property Organization.

Exceptional Cargo

Goods that are not usually loaded in a transport unit that can be packaged and sealed due to weight, size or nature, provided that such goods can be easily recognized.

Zakat Year (Al Hawl)

When the twelve lunar months have passed, i.e. (354) days have passed since the zakatable funds (Nisab) have completed one Hijri year (Al Hawl). It is a condition of zakat and its payment in full. If the zakat year of the zakat payer differs from the Hijri year, the zakat payer should pay the due zakat in proportion to the number of days of the year, according to the following method: Dividing two and a half percent (2.5%) by the number of days in the Hijri year (354) multiplied by the number of actual days of the zakat year for the zakat payer.

Possession of Goods for Commercial Purposes

Possession of excise goods for the purposes of commercial activities, or any related activities, or possession of excise goods in a quantity that exceeds the limits determined by ZATCA.

Constructive Possession

A term referring to the circumstance where a person holds legal ownership of an asset, without holding the physical possession or the right to use this asset.

Actual Possession

A term referring to the case circumstance where a person holds physical possession and right to use of an asset (whether or not that person holds legal ownership).

Taxable Person

A person who carries out an economic activity independently with the aim of generating income, and is registered or obligated to register for tax purposes in accordance with the provisions of The Unified Agreement for VAT of GCC.

Tax Stamp

It means the unique mark stipulated in Article (18) of The Unified Agreement for Excise Tax of GCC which is a label, symbol, or mark placed on specific excise goods, designed electronically in terms of shape and information as determined by ZATCA.

Regulated Financial Services

Financial services that are governed by laws and regulations on what financial institutions are allowed to do.

Initial Input Tax Deduction

The deduction of input tax made by a taxable person upon the purchase of a capital asset, calculated by applying the initial recovery percentage to the total input tax incurred on that capital asset.

Proportional Deduction

The method of calculating deductible tax when the input tax is related to goods and services used to make taxable supplies and non-taxable supplies, based on the proportion referable to the taxable supplies.

Customs Line

Means that line conforming to the political boundaries separating between the country, the adjacent countries and the seashores surrounding that country.

Customs Office

Means the sector, designated by the Minister, at each seaport, airport, and land port or at any other place where there is a branch office of the administration authorized to complete all or some of the customs procedures.

The Income

The total amount that a person earns from the work or activity he practices in accordance with the rules and provisions contained in the income tax law and its implementing regulation.

Taxable Income

Total income including all revenues, profits, and earnings resulting from practicing economic activities, regardless ofWW its type and its method of payment including capital earnings and any incidental revenues minus the exempt income, in accordance with the provisions and rules contained in the income tax law and its implementing regulation

Exempt Income

It is some form of non-taxable income, such as capital earnings achieved from disposal of securities, as well as the earnings resulting from disposal of properties that are not the assets used by the economic activity, in accordance with the income tax law and its implementing regulation.

Commercial Books

The set of commercial books that the tax/zakat payer keeps, in which he records all the details of his business.

ATA Carnet

The temporary admission documents used for the temporary admission of goods, excluding means of transport.

CPD Carnet

Means the temporary admission documents used for temporary admission of means of transport.

Tax Jurisdiction

The jurisdiction in which a person is considered a person subject to tax or a taxpayer pursuant to the laws of that jurisdiction. idiction fiscale

Explanatory Opinion

A legal opinion and statement issued by ZATCA for explanatory purposes to respond to a ruling when it appears to ZATCA that the requested matter does not require providing a ruling.

Basic Pay/Wage

All that is given to an employee in return for his/her work, under a written or unwritten work contract, regardless of the type of remuneration or payment method, and in addition to periodic increments.

Zakat Assessment

A decision by ZATCA that discloses its acceptance of the declaration or its amendment according to the information available to it, and the applicable procedures in ZATCA.

Import/Export Licence (Import/Export permit)

An authorization issued by a competent authority for the importation or exportation of goods subject to restriction.

Duties

The amounts collected by the Authority for services.

Demurrage

This term relates to the charges fixed by the Harbours Board on ships/cargo delayed in harbour in excess of the permissible clearance or delivery period. However, it does not affect the value of the goods but any considerable delay in processing/completion of customs formalities is bound to cause additional burden on the importer by way of demurrage accumulation. Hence speedy clearance helps importers as well as avoid congestion in the wharf.

Collection Fee (CF)

Collection Fee Charge (percentage) imposed by the Shipping Co. where overseas freight and other charges are to be collected.

Customs Duties

Duties laid down in the customs tariff to which goods are liable on entering or leaving the customs territory.

Duties and Taxes

Import duties and taxes and/or export duties and taxes.

Ad Valorem Duties and Taxes

Under the WCO glossary of international customs terms this term means any duties and taxes which are calculated on the basis of value. Apart from customs duties, VAT is another example of an advalorem tax that is used in many countries.

Import Duties and Taxes

Customs duties and all other duties, taxes or charges which are collected on or in connection with the importation of goods, but not including any charges which are limited in amount to the approximate cost of services rendered or collected by the customs on behalf of another national authority.

Healthcare

Preventive, therapeutic and rehabilitative services concerned with the health of the individual and the community at the primary, secondary and specialist levels. This may include the supply of medicine or medical items as a part of the therapeutic or health service.

Customs Control

Under the WCO glossary of international customs terms this term means the measures applied by customs to ensure compliance with customs law.

Tax Number

It is a fifteen digit number that the establishment obtains after registering for a value added tax or excise tax; it must appear in the invoice issued by the establishment and in the tax certificate.

TIN (Tax Identification Number)

A number consisting of ten digits. It is considered the establishment's reference at ZATCA, it can be shown on the invoice of the establishment. Usually a TIN is used to identify the establishment at ZATCA.

Zakat

Fixed percentage of money that Allah has imposed on the rich for the sake of the poor; it is the third pillar of Islam, and one of its obligations, and it is one of the pillars that distinguishes the Muslim community from other communities, with what it represents as a successful way to combat poverty and ease the suffering of the needy, which leads to achieving social solidarity.

Zakaty

An optional service that enables individuals to pay zakat in a smooth and easy way whether abroad or residents of Saudi Arabia through the electronic payment systems "SADAD" and "Mada"; in order to facilitate the payment of zakat at any time and from anywhere. Zakaty

Zakat of Deemed Calculation

A method used by ZATCA in calculating zakat on a zakat payer who does not maintain commercial books and statutory accounts. ZATCA resorts to this method when the zakat payer does not comply with the specified deadlines for submitting the declaration, or when there are problems related to ZATCA'S confidence in the accuracy of the data provided by the zakat payer, in order to make an estimation that is as realistic as possible of his actual base. This is because the zakat base for the zakat payer is based on his statutory records that contain the data through which he can identify the base; when this is not possible, ZATCA creates the zakat base according to the information available about the zakat payer so that his zakat base can be estimated as accurately as possible.

Accounting Records

All documents, books, and accounting entries that contribute to preparing the financial statements including: records of assets, liabilities, and supporting documents, such as: checks, payment receipts, receipts, invoices... etc.

Standard Price

The price according to the standard price list as established by the Tax Authorities of GCC countries. The standard price is also known as the minimum price or minimum value.

Competent Authority

Under the Common Customs Law for the Arab States of the Gulf the term "competent authority" means the authority to which the customs administration reports.

Unit Price at the Greatest Total Quantity

The unit price at which certain goods are sold to unrelated persons, primarily at the level of trade after importation at its importation conditions or after further preparations or processing, if the importer so requested. Related persons mean:

legally recognized partners in business;
officers or directors of one another's business;
employer and employee;
any person directly or indirectly owns, controls or holds 5 percent or more of the outstanding voting stock shares of both of them;
one of them directly or indirectly controls the other.
both of them are directly or indirectly controlled by a third person; or
Members of the same family.

Goods

All types of material property (material assets), including water and all forms of power including electricity, gas, lighting, heating, cooling and air conditioning.

Public Goods

Goods that would not be provided in a pure free market system.This is because there are goods that display two particular characteristics: Non rivalry consumption by one person does not reduce the amount available for others.

Reporting Year

The fiscal year of the taxpayer as defined by the tax laws.

Debt Security

Any debt instrument that creates a debt that constitutes an acknowledgment of debt issued by companies, governments, or public institutions, such as sukuks. Debt securities are negotiable, including, but not limited to, bonds issued by companies, government bonds, asset-backed bonds, certificates of deposit, and bonds. Commercial papers such as checks and bills of exchange are excluded.

Equity Security

Any instrument that demonstrates legal ownership by a person in an entity or project. It includes shares, stocks, and any instrument or document representing an ownership right in an entity or project, or representing participation in the capital of an entity or project, or the right to receive profits or part thereof. Shareholding bonds may be negotiable.

Duty-Free Shop

Means that licensed building or place wherein goods are placed free of customs duties for purposes of display or sale.

Black Market

This term is often used when goods are sold out at a higher price with a profiteering motive by creating scarcity by means of hoarding, (in such a situation common man/grassroots faces hardship because he pays a high price which does not actually represent the fair normal value).

Transfer Pricing Policy

The approach taken by related parties when determining the price of the product or service.

Airfreight

Shipping charge for air cargo. Usually charged by the airline companies on the basis of measurement of the packages, volume, weight, or value of the goods as reflected on the Airway Bills.

Consignment

Goods, which are either sent sequentially from one exporter to one consignee or covered by a single transport document, including their shipment from an exporter to a consignee or if otherwise such document is absent is covered by a single invoice.

Legal Person

It refers to a company or other entity that has legal personality under the KSA Companies Law. A natural person is not regarded as a legal person, and a legal person does not include joint venture companies as defined in the KSA Companies Law.

Appointed Person

An appointed person, whether he was an administrator, personal representative, executor of a will, receiver or liquidator who has been appointed legally to administer, manage, liquidate or wind up the affairs of a taxable person including a deceased natural person. The appointed person shall notify the Authority in writing of the appointment within twenty (20) days of the date of the appointment.

Capital Company

By this definition, capital companies include joint stock companies, limited liability companies, and limited liability companies with shares. Investment funds are considered capital companies for the purposes of income tax law.

Real Estate Companies

Companies whose properties represent more than 50% of their assets, or their capital.

Mixed Companies

Companies incorporated and residing in Saudi Arabia for tax purposes, and whose shares are owned by Saudi individuals (and those who are treated as Saudis for income tax purposes) and non-Saudis.

Partnership Company

A company that is based mainly on personal considerations, whereby a number of individuals agree and participate in establishing a company with a specific commercial objective such as trading electrical appliances. This company takes into account all partners during all transactions, and none of them is allowed to give up his share in the company except after the approval of all parties. A partnership company has a small capital compared to capital companies. By this definition, partnership companies include joint liability companies, joint venture companies, and simple partnership companies.

Special Purpose Entity

A subsidiary entity created by the Custodian for the registration of the assets held on behalf of the Investment Fund.

Trade Terms or Incoterms

It is the agreed terms of trade international contracts, designed to communicate which party is responsible for various costs and risks surrounding the transport of goods.

Registration Certificate

A certificate obtained by the establishment in the event that the registration requirements in the ZATCA system are fulfilled; it must be obtained within the first fiscal year in the first 12 months of practicing the activity.

Certificate of Registration for VAT

ZATCA issues a VAT registration certificate to the taxpayer after processing and approving his application for VAT registration. This certificate includes: the name of the taxpayer, his account number (VAT TIN which must be shown in the tax invoices), and the effective date of the registration. Each VAT certificate contains a special number.

Zakat Certificate

A certificate issued to the zakat payer upon his request; to be used in proceedings with other governmental procedures. It is issued only when there are no cases of submission of declarations, late payments, or any current obligations.

Instant Certificate

A certificate issued immediately after submitting declarations related to zakat for a specific financial period and paying its related payments.

Certificate of Origin

A specific form identifying the goods, in which the authority or body empowered to issue it certifies expressly that the goods to which the certificate relates originate in a specific country. This certificate may also include a declaration by the manufacturer, producer, supplier, exporter or other competent person.

Certified Declaration of Origin

A declaration of origin certified by an authority or body empowered to do so.

Employer

Any natural or legal person employing one or more workers/employees for remuneration/ wage.

Exports

Goods and services one country produces and sells to others. The opposite of imports, strong exports are necessary to have a favourable balance of trade.

Net Tax

Tax resulting from deducting the deductible tax in a member state from the tax due in that state within the same tax period. Net tax may either be payable or refundable.

Investment Fund

It is a collective investment scheme aimed at providing investors therein with an opportunity to participate collectively in the profits of the scheme.

Guarantor or Surety

A person authorized by customs authorities in a contracting country to provide guarantees and sureties for transit process.

Direct Tax

A tax imposed directly on the taxpayer, such as income tax.

Indirect Taxes

Taxes that a customer bears and are imposed through an intermediary so that he is responsible for collecting them and supplying them to ZATCA, such as value added tax and excise goods tax.

Withholding Tax

A direct tax that is deducted from the amounts earned by a non-resident who does not have a permanent establishment in Saudi Arabia but earns income from another source in Saudi Arabia.

Real Estate Transactional Tax

An indirect tax imposed on all transactions under which a legal effect resulted in the form of transferring the right of ownership of the real estate or possession of it for the purpose of owning it, or the possession of its benefit from one person to another; transactions may be based on an agreement between the two parties such as selling or based on the independent freewill of the owner such as a devisor's will.

Income Tax

A direct tax imposed on resident capital companies for shares owned directly or indirectly by non-Saudi persons, or on persons working in the production of oil and hydrocarbons. It is also imposed on non-Saudi natural persons residing in and practicing economic activities in Saudi Arabia, and on non-resident persons who practice economic activities in Saudi Arabia through a permanent establishment, or who have taxable income earned from sources in Saudi Arabia without having a permanent establishment, and for every person working in the field of investment, transportation of natural gas.

Excise Tax

An indirect tax imposed on types of goods that are harmful to public health and the environment in addition to selected types of luxury goods (soft drinks, energy drinks, tobacco and its derivatives).

Deductible Input Tax

Input tax that may be deducted from tax due on supplies for each tax period in accordance with the agreement and local law.

Value Added Tax (VAT)

An indirect tax imposed on all goods and services that are bought and sold on a regular and continuous basis by persons subject to tax, with some exceptions. The value added tax is imposed at every stage of production, starting from distribution until the stage of sale to the consumer. VAT is obligatory to every individual or company that practices an economic activity if the value of his annual taxable revenues exceeds 375,000 SAR.

Output VAT or Output Tax

The tax due and chargeable on any taxable supply of goods or services made by a taxable person. This is usually collected by the person making the supply.

Input Tax

The tax borne by a taxable supply of goods or services supplied to him or imported for the purpose of carrying on an economic activity. It includes the supplies or imports made only in KSA as per KSA VAT Law.

Guarantee

It is a cash or bank guarantee required by ZATCA from the taxpayer to ensure the fulfilment of his tax obligations. The taxpayer will be acknowledged through a written notification that specifies the type of guarantee required, guarantee value, and guarantee period in accordance with the provisions contained in the implementing regulations of the value added tax law.

Specified Routes

Means the routes specified by the Minister or competent authority for the transport of the imported or exported goods into/from the country or the goods in transit under a resolution.

Methods of Zakat Calculation for Companies

Zakat for existing companies is calculated using one of two methods:

Direct method (net of zakatable assets method):
Indirect method (sources of funds method):

The procedures of each method differ as well as the items used for the purposes of calculating zakat, but both match in the result (zakat base). Both methods reach the same result if they are applied correctly and use the same standards and criteria. The following is a summary of the two methods:

Direct method (net of zakatable assets method):This method is based on two basic procedures:

Addition of all zakatable assets of the entity, including accounts receivables for the zakat payer.:
Deduction of the value of the obligations that funded the zakat assets. The result of this formula is the zakat base of the zakat payer.

Indirect method (sources of funds method):This method is based on two basic procedures:

Add:
- Sources of external funds utilized for deductible assets (long-term liabilities and obligations known to have financed deductible assets, up to the limit of deductible assets).
- All sources of internal funds of the entity (capital, retained earnings, etc.).
- Adjusted net profit for the year subject to audit.
Deduct:
- The value of non -zakatable assets of the entity to be deducted in accordance with the conditions of the regulation.
- The value of the zakatable assets in other entities, such as: (investment in the shares of Saudi companies).

The result is the zakat base for the zakat payer. This method is followed by ZATCA.

Cost Plus Method (C+ Method)

Cost Plus Method, one of the approved TP methods that measures the costs incurred by the supplier of property (or services) in a controlled transaction for property transferred or services provided to a related purchaser. An appropriate cost plus markup (being a gross margin) is then added to this cost, to make an appropriate profit in light of the functions performed and the market conditions.

Profit Split Method

One of the approved methods for pricing transactions through which a portion of the combined profits (or losses) resulting from the related transaction is allocated to each person involved in a transaction between related persons that the independent person would receive or expect to receive from a comparable, arm's length transaction. When the financial compensation for the functions performed by a person participating in a transaction between related persons is determined on the basis of the arm's length price using one of the approved methods, the profit split method must be applied based on the joint profits remaining after payment of the compensation for these functions.

Resale Price Method

One of the approved methods for pricing transactions to compare the margin achieved by the purchaser of a property in a transaction between related persons from the resale of that property in an independent transaction with the margin achieved in similar transactions and resales between independent persons.

Request of Reducing the Expedited Payments

A written request submitted by the taxpayer to ZATCA supported by justifications and proper documents to reduce the value of the second and third expedited payments because of the decrease in his revenues. ZATCA may reduce the value of the due payments solely upon its judgement that the taxpayer's income for the current year is less than the income of the previous year by a minimum of 30%.

Refund Request

It is a request submitted by the taxpayer or his representative to ZATCA requesting a refund of the tax paid in excess, or any other amounts paid in excess, in accordance with the terms and provisions mentioned in the laws, regulations, and bylaws issued by ZATCA.

Ruling Request

A formal application made to ZATCA by an applicant to obtain a ruling on a specific matter, using the prescribed format.

Zakat Year

It is the zakat payer's fiscal year, that is, the time period that shows the earnings of the zakat payer's activities. The fiscal year can be: Hijri or Gregorian, short (less than 12 months), long (a full year of 12 months), and at the beginning or end of the activity.

Customs Transit

Means the customs procedure under which goods are transported under customs control from one customs office to another.

Representative Member

Refers to the taxable person in the tax group that submits the application to ZATCA to form the the tax group. The tax group representative member is one of the members of the group and is the one authorized by the other members to represent the tax group in all its tax affairs, and is responsible with regard to the obligations and rights devolving on the group, on behalf of all its members such as filing tax returns, without prejudice to the joint liability of the other members of the group.

Real Estate

Everything that is fixed in a location and cannot be moved without damage, includ ing: built properties, land, and all the rights that are derived from that. The definition of real estate includes the following:

Any specific area of land on which ownership rights, possession rights, or other in kind rights.
Any buildings or engineering construction that are permanently built on a land.
Any installations or equipment that form a fixed part, or are permanently attached to a building, structure, or engineering work.

Lease Contract

Providing ownership to the lessee by the lessor of an intended benefit of the leased object for a certain period in return for a known fee.

Finance Lease Contract

A finance lease contract established between the lessor and the lessee, according to which the lessor is obligated to transfer the leased asset owned by him, or which he obtained from the supplier to the tenant's possession to be used by him, provided that the ownership of the asset is transferred to the lessee, or the lessee has the option to purchase the asset after the end of a certain period, and to settle the obligations agreed upon between the contracting parties.

Life Insurance Contract

Any contract of conventional insurance or Takaful or another form of Islamic insurance provided by a regulated provider in the KSA which results in the payment of a sum contingent on death or another significant event of human life, or a similar contract provided by a non-resident supplier.

Contract which Anticipates the Application of VAT

A contract to which the transitional rules relating to the application of the zero rated VAT does not apply. ZATCA considers this to be any binding agreement between two parties which sets out implicitly or explicitly how VAT is to be applied to the contract and the payable consideration for goods or services. This is meant as any written contract providing the following:

Stating whether the price payable for the goods or services are inclusive or exclusive of VAT, or are inclusive or exclusive to taxes generally;
Specifying a mechanism to determine how the price may be adjusted or may not be adjusted to reflect a change to VAT (or "taxes") applied to the goods and services provided under the contract.

Murabaha Contract

A type of Islamic finance, also known as costplus financing, in which the seller and the buyer agree on the cost and profits of the material asset.

The Compensating Contract

The contract that gives rise to a free and voluntary obligation between the contracting parties to perform their counterpart obligations by taking and bidding; to own an item, to utilize a benefit, a service, or to acquire a financial right.

Barter Contract

A contract whereby there is an obligation on each of the contracting parties to transfer to the other, by exchange, the ownership of assets that are not money.

The Useful Life

The expected period of time of the capital asset during which the asset is available for use by the taxable person in his economic activities.

The Remaining Useful Life

Defined for VAT purposes in relation to capital assets that are sold or used for non-economic purposes before the end of the corresponding adjustment period. It is defined as:

The period of adjustment (determined in accordance with the second paragraph of Article 52 of VAT regulation) less the number of part or full years during which the taxable person has used this capital asset.

TIR Transport

The transport of goods from a customs office of departure to a customs office of destination.

Transit Process

Transport of goods from customs release office to destination office.

Sales Commission

Means the commission paid to the seller's agent who is related to the seller or the factory, governed by or acting for its favor or on its behalf.

Customer

A person who receives goods or services.

End Customer (for Underlying Goods or Services)

The person who receives the underlying supply of goods or services regardless of whether the "end customer" also consumes or benefits from the goods or services.

Non-Registered

A person who is not registered with ZATCA for the purposes of of zakat or tax, whether he is subject to tax/zakat or not.

FATCA

Foreign Accounts Tax Compliance Act, related to foreign accounts held by Americans living abroad.

Tax Invoice

An invoice issued for supplies subject to tax, including all the elements that must be provided, in accordance with the requirements set out in the VAT law and its regulation.

Electronic Invoice

An invoice that is issued, saved, and modified in an electronic form organized through an electronic system, and contains all the requirements of the tax invoice. A handwritten or scanned invoice is not considered an electronic invoice.

Simplified Tax Invoice

An invoice that can be issued for taxable supplies in certain situations. It is a form of tax invoice that requires less amount of information in comparison to a "standard" tax invoice.

Adjustment Period

The period in which the taxable person shall adjust previously deducted input tax in relation to a capital asset in cases where the taxable person's input tax decreases or increases as a result of a change in the way the taxable person uses the asset, or a change in the VAT status of such use.

Tax Period

The period of time during which the net tax must be accounted. In KSA, the tax period is either a calendar month or quarterly.

Examination

An audit on the compliance of a taxable person with his VAT obligations, carried out by ZATCA at the taxable person's premises or any other location.

E-Invoicing

A procedure aimed at converting the billing process and paper amendments into an electronic process that allows the exchange of invoices and their amendments and processing in an organized electronic format between the seller and the buyer in an integrated electronic format.

Examination of Goods

The physical inspection of goods by customs to satisfy themselves that the nature, origin, condition, quantity and value of the goods are in accordance with the particulars furnished in the goods declaration.

Tariff Nomenclature

It means any classification and coding system introduced by national administrations or customs or economic unions to designate commodities or groups of related commodities for customs tariff purposes.

GCC Tariff and Customs Law

The Common customs Law of the GCC States was adopted in 1999 for unification of the customs laws and procedures in the customs administrations of the GCC States. It involves adoption of a common customs law, which unifies customs procedures in all GCC customs administrations and enhances cooperation among member states in the customs field.

Customs Law

The statutory and regulatory provisions relating to importation, exportation, movement or storage of goods, the administration and enforcement of which are specifically charged to the customs, and any regulations made by customs under their statutory powers.

Ruling

It is a mechanism used by the taxpayer or taxable person to request a reliable opinion from the Authority regarding the interpretation of the provisions, regulations, instructions, or international agreements to which the Kingdom is a party, regarding matters related to the economic activity that the taxpayer currently manages or plans to start.

A Face Value Voucher

A voucher which is issued with a specific monetary redemption value indicated on the voucher or in related documentation.

Consolidated Financial Statements

Means the financial statements of an MNE group in which the assets, liabilities, in come, expenses and cash flows of the ultimate parent entity and the constituent entities are presented as those of a single economic entity.

Net Book Value

Refers to the carrying value of capital assets as reported on the commercial books, according to the accounting principles generally accepted in the Kingdom.

Fair Market Value

The consideration payable for supplies of similar and concurrent goods or services provided flexibly between persons who are not related.

The Purchase Value

The cost paid to the supplier for the asset itself, and other capitalized expenditure on that asset.

Customs Value

Value of imported goods for the purpose of imposing customs duties according to value.

Non-Tariff Restrictions

Measures and actions that the state party may take to control imports for other than regulatory or statistical purposes.These restrictions include in particular quantitative, monetary and administrative restrictions on imports.

Black Money

In order to evade taxes, some persons falsify their accounts and do not record all transaction in their books of accounts. The money which thus remains unaccounted for and is illegally accumulated (generally by foul means) is called black money. This is very harmful for the economy of the country. Sometimes compensation payments are made out of such black money and are not shown in normal documents.

Ultimate Parent Entity

Means a Constituent Entity of an MNE Group that: Owns directly or indirectly a sufficient share interest in one or more of the other constituent entities of this MNE group such that it is required to prepare consolidated financial statements under accounting principles generally applied in its country of tax residence, or would be required to do so if its equity interests were traded on public securities exchange in its country of tax residence; and

there is no other constituent entity of such MNE group that owns directly or indirectly an interest described in subsection above.

Reporting Entity

A constituent entity that is required to submit a Country by Country report to the Authority or any other tax authority on behalf of a multinational enterprise group.

Profit Level Indicator

The denominator of the net margin indicator that should reflect the relevant indicators of value of the functions performed by the tested party in the transaction under review, taking into account its risks assumed and asset employed.

Operating profit margin or sales returns.
Net cost margin with added profit margin.
Returns on operating assets or returns on employed capital.
Perry ratio (Gross profit from operating employed capital. expenses).

De Facto Owner of Intangibles

Means the person that is in control of the DEMPE functions, making the significant decisions and able to manage and bear the respective risks, and thus can be regarded as the "economic owner" of the intangibles. It is possible that the legal owner and de facto owner are not the same person.

Cargo Manifest

A listing of the goods comprising the cargo (freight) carried in a means of transport or in a transport unit. The cargo manifest which gives the commercial particulars of the goods, such as transport document numbers, consignors, consignees, marks and numbers, number and kind of packages, descriptions and quantities of the goods, may be used in place of the cargo declaration.

Arms Length Principle or "Arms Length"

For income tax purposes, and when there is a difference between the terms and conditions of commercial and financial transactions that take place between associated persons and the terms and conditions of commercial and financial transactions that take place between independent persons, the unrealized profits that could have been realized if it wasn't for these terms and conditions by any of the associated persons are considered within this person's profits, and taxed accordingly.

Total value of Taxable Supplies

The total value of taxable supplies of a KSA resident during a twelve month period.

Tax Group or VAT Group

A group of two or more legal persons resident in KSA, who are treated as being a single taxable person for VAT purposes and registered for VAT with a separate and new Tax Identification Number (TIN) issued by ZATCA to the tax group representative on behalf of the tax group.

Invoice Accounting Basis

The primary method for calculating and declaring value added tax based on the date on which each supply occurred.

Cash Accounting Basis

An alternative method for calculating and reporting VAT based on the payment date for each supply.

Storehouse

Means that building or place intended for the temporary storage of goods pending their withdrawal under one of the customs procedures whether such place/building is directly administered by the administration or by the official public agencies or the investors.

Customs Broker

Means any legal or natural person licensed to undertake customs clearance for the account of the others.

Information Submission Period

Is a 20-day period granted to the taxpayer to provide the Authority with the additional information it has requested regarding the Ruling request. The 20-day period begins from the date the Authority requests the additional information.

Fund Manager

The person that is responsible for the management of the assets of an investment fund, its operations, and the offering of its units.

Consignee

The recipient to whom goods are physically delivered by a supplier or consignor.

Place of Effective Management

The place of effective management means the place where key management and commercial decisions that are necessary for the conduct of the entity's business are in substance made. The place of effective management will ordinarily be the place where the most senior person or group of persons (for example a board of directors) makes its decisions, and the place where the actions to be taken by the entity as a whole are determined; however, no definitive rule can be given and all relevant facts and circumstances must be examined to determine the place of effective management. An entity may have more than one place of management, but it can have only one place of effective management at any one time.

Customs Approved Route

Under the WCO glossary of international customs terms this term means any road, railway, waterway, airway and any other route (pipeline, etc.), which must be used for the importation, customs transit and exportation of goods.

Customs Broker Assistant

Any natural person licensed to perform the administrative functions of customs clearance activity and follow up the customs actions on behalf of the customs broker.

Temporary Admission Documents

Means the international customs document accepted as a customs declaration, which makes it possible to identify goods (including means of transport) which incorporates an internationally valid guarantee to cover import duties and taxes.

Warehouse

Means the place or facility wherein the goods are deposited under supervision of the administration free of customs duties (taxes).

Tax Warehouse

The designated place where it is permitted to the licensee to produce, transfer, store, or receive excise goods under tax suspension arrangement.

Bond or Bonded Warehouse (Licensed Warehouses)

A building approved by the customs authorities for the storage of imported goods without payment of duties until their removal on payment of duty or for re-export.

Importer

The natural or legal person importing the goods.

Registered Person

A person registered with ZATCA for the purposes of zakat or tax in accordance with the laws, regulations and instructions.

Energy Drinks

Any beverages that are marketed or sold as energy drinks that may contain mental or physical stimulants and include, but not limited to: caffeine, taurine, ginseng, and guarana as well as any other substances that have a similar effect. Any concentrates, powders, gels, or extracts that can be converted into energy drinks are also considered energy drinks.

Soft Drinks

Any beverages that contain gas, except for unflavored sparkling water. Any concentrates, powders, gels, or extracts that can be converted into soft drinks are also considered soft drinks.

Sweetened Beverages

Any product to which a source of sugar or other sweeteners are added, produced for the purpose of drinking as a beverage, whether it is ready to drink, concentrates, powders, gels, extracts, or any form that can be converted into a beverage.

Income-Generating Expenses

Regular and necessary expenses, whether paid or due, incurred during the tax year to earn a taxable income. These expenses are eligible for deduction when calculating the tax base except for any capital expenditures and other expenses that are not subject to deduction under the income tax law and its implementing regulation.

Source

The country from which the goods are imported.

Exporter

The natural or legal person exporting the goods.

Source of Income

Cases where the income is considered to be generated from economic activities in Saudi Arabia; the nature of income source determines whether the income is subject to tax or not, according to the income tax law and its implementing regulation.

Authorizer

A person or a representative who signs the transit permit.

Metal Refiner

Any person who carries on the refining by any process of a commodity into a qualifying metal.

Comparable Transaction

Means an uncontrolled transaction is comparable to a controlled transaction when:

There are no significant differences between them that could materially affect the financial indicator being examined under the appropriate transfer pricing method; or
When such material differences exist, if a reasonably accurate comparability adjustment is made to the relevant financial indicator of the uncontrolled transaction in order to eliminate the effects of such differences on the comparison. Transaction comparable

Controlled Transaction

Means any transaction involving related persons or persons under common control. Controlled transactions shall include any national transactions and consideration exchanged between a person and its permanent establishment, to the extent that such transactions are recognized for the purpose of the law.

Transactions

Any arrangement, understanding, agreement, or mutual practice whether or not legally enforceable undertaken between two or more persons.

Average Cost

The total cost of production of a commodity incurred by a firm during a period divided by the number of its units of output. When calculating total cost in conditions of either perfect competition or monopoly it is usual to include normal profit.

Consideration

Everything collected or to be collected by the taxable supplier from the customer or a third party for the supply of goods or services inclusive of the VAT.

Place of Business

The place where a business is legally established; or where its actual management center is located and where key business decisions are made if it was different from place of establishment.

Resident

A person shall be a resident of a country if the conditions of residency specified in each law apply to him; this includes natural persons who own a place of residence in Saudi Arabia and legal persons who have a head office of their business or a permanent establishment in Saudi Arabia.

Place of Actual Consumption

Is the place where the customer actually consumes the goods in the context of a supply of electricity, gas, oil, water or other utilities through a pipeline distribution system. ZATCA considers the place of actual consumption is the registered premises or delivery point to which the goods are delivered.

Place of Supply

The country or any other place where the supply is considered to take place for VAT purposes, according to the rules stipulated in the Unified Agreement for VAT of the GCC, the VAT Law, and its implementing regulations.

Transit Office

An office of a contracting party where a transport unit passes through during the transit process.

Release Office

An office of a contracting party where transit process starts. Such office may perform the duties of a load office as well.

Load Office

An office located in the territory of a contracting party that has the authorities to place customs seals on the transport units for transit purposes.

Zakat payer

A natural or legal person who carries out an activity that is subject to zakat, tax and customs regulations whether the activity is a sole proprietorship, a company, or whoever carries out a business activity under a license issued by a competent authority.

Zakat Payer not Subject to Zakat

A zakat payer who according to the Authority's procedures has a certificate of "non-applicable to the levy of zakat".

Zakat Payers for Zakat Assessment on an Arbitrary Basis

Any zakat payer who does not have commercial books that are the results of the business and is not required to issue financial statements in accordance with applicable laws, regulations and rules.

Beneficial Ownership

Means a natural person(s) who ultimately own(s) or control(s) the funds of the clients or on whose behalf a transaction or activity is being conducted. It also incorporates those persons who exercise ultimate effective control over a legal person or arrangement.

Ownership and Control of Capital and Voting Rights

It is one of the requirements for forming a tax group in which each legal person should be subject to common financial control. For tax grouping purposes, common financial control requires that the same person or group of persons hold a common interest, directly or indirectly, being either:

50% or more of the capital of each legal person being a member of the tax group desired to be formed, or

50% or more of control over the ownership or the voting rights in both or all of the legal persons of the tax group desired to be formed.

Tax Representative

Is a person residing in Saudi Arabia who represents a non- resident taxable person in all matters related to VAT, and he shall be responsible, together with the taxable person, for the payment of any financial obligations related to VAT.

Special Agent

Any natural person who is an employee in one of the government sectors or general sector or commercial sector who is authorized to complete customs actions needed for its imports or exports.

Customs Broker Agent

Any natural person licensed to perform customs procedures.

Origin of Goods

The producing country, whether these goods are natural resources, agricultural crops-animal or industrial products.

Permanent Establishment

A permanent establishment for a non-resident in Saudi Arabia which is a permanent place for the activity of a non-resident through which the activity is practiced in whole or in part, and this includes the activity that the non-resident performs through his local representative.

Customs Zone

It is the part of the lands or seas subject to the customs control and procedures.

Free Zone

Means a part of the state's territories in which commercial or industrial activities are exercised under the respective laws of that state. Any goods entering that zone are considered to be outside the customs zone and shall not be subject to the usual customs control and procedures.

Transit Zone

Territories of the contracting parties to the agreement on the regulation of transit transport among Arab States.

Free Trade Area

Under the WCO glossary of international customs terms this term means an entity formed by the customs territories of an association of states and having in its ultimate state the following characteristics:

the elimination of customs duties in respect of products originating in any of the countries of the area
each state retains its customs tariff and customs law
each state of the area remains autonomous in matters of customs and economic policy
trade is based on the application of rules of origin, to take account of the different Customs tariffs and prevent deflection of trade
the elimination of restrictive regulations of commerce within the free trade area

The World Trade Organization (WTO)

An international organization dealing with the global rules of trade between nations. Its main function is to ensure that trade flows as smoothly, predictably and freely as possible.

Supplier

The person who supplies goods or services.

Free Port (Duty Free Port or Zone)

It is a port where no customs duties are levied on the imported goods. Singapore and Hong Kong are considered as the biggest free ports.

Trustee

The trustee is a designated person who assumes the functions of administering the trust by preserving the trust's assets and related documents, and who is authorized to enter into transactions with third parties on behalf of the trust and in respect of the trust assets.

Carrier

Means the owner of a means of transportation or his authorized representative.

Actual Taxable Use Percentage

It refers to the taxable usage of a capital asset during a twelve month period, as a portion of total usage during that twelve month period. This percentage is compared to the initial recovery percentage to determine if an adjustment is required.

Activity

Any business established for the purpose of earning money, whether it is in the commercial sector, industry sector, or services sector..etc.

Economic Activity

This is a broad term referring to the business activities which are in principle subject to VAT. This is defined in the Unified VAT agreement as an activity that is conducted in an ongoing and regular manner including commercial, industrial, agricultural or professional activities or services or any use of material or immaterial property and any other similar activity.

Commercial Activity

All forms of business, whether commercial, service, or other works intended to generate a profit. Commercial activities include real estate, commodity trading, provision of service, securities, finance, insurance and all banking activities.

Customs Territory

Means that part of lands or seas subject to specific customs control and procedures, including:

Sea Customs Territory: Which includes that part of the sea located between the shores and the end boundary of the territorial waters.
Land Customs Territory: Which covers the lands located between the land boundaries or shores, on the one hand, and the internal line on the other hand, to be prescribed by a resolution by the Minister or the competent authority.

Arm's Length Range

Means a range of acceptable arm's length financial indicator figures (such as without limitation) prices, margins, or profit shares produced by the application of the most appropriate transfer pricing method selected in accordance with TP bylaw to a number of uncontrolled transactions, each of which relatively equally comparable to the controlled transactions based on a comparability analysis conducted in accordance with the TP bylaw.

The Pipline Distribution System

Any integrated network of pipelines or similar infrastructure, that can transport oil and gas from one stage of the supply chain to another such as transmission networks, distribution networks, and associated facilities connected to those networks whereby refined oil or gas are distributed to distributors or consumers by contrast, a single transmission pipeline used for transporting crude oil or gas to or from a refinery is not likely to be viewed as a pipeline distribution system.

Income Tax Law

The provisions of the Kingdom of Saudi Arabia's income tax law issued by Royal Decree No. (M/1) dated 15/1/1425H and the amendments thereon.

International Transport

The provision of a transportation service by means of a vehicle, aircraft or vessel together with a driver or pilot and with a crew where necessary for the purpose of that service, provided that the transportation service involves transport of goods or passengers either to a place outside the Kingdom, or from a place outside the Kingdom into the Kingdom.

Passenger Transport

A transport service where one or more passengers are transported in any vehicle, regardless of whether the vehicle is designed for passenger transportation or the supplier is licensed to provide passenger transport. Any goods carried with a passenger is part of passenger transportation.

Disclosure Form

The document or set of documents that the taxpayer must submit to the Authority pursuant to Article 14 of transfer pricing bylaws.

Operating Profit Margin

Means the margin calculated by dividing earnings before interest and tax (EBIT) or operating profit by net sales.

Settlor

The person who establishs and contributes assets to a trust. Can also be referred to as the founder of the trust.

Transport Unit

Means any means of transporting goods suitable for use in a customs transit operation or under customs seal.

Qualifying Means of Transport

Any vehicle, vessel or aircraft designed or adapted to carry a minimum of (10) people, or designed to carry goods on a commercial basis which is used predominantly for international transportation and not domestic passenger transportation.

Customs Broker

It means any legal or natural person licensed to undertake customs clearance for the account of others.

Tariff Description

Means the description of an article or product in accordance with the terminology used in the tariff nomenclature.

Tax Suspension Status

The situation in which the tax due on locally produced or imported excise goods is suspended.

Zakat Base

The base at which the zakat payer collects his funds from all kinds of zakat that he has, a (2.5%) percentage shall be levied as the zakat amount due.

The direct method (the net of zakatable assets method): All zakat assets deducting from them all the obligations that funded them.
Indirect method (Sources of funds method): All sources of internal funds (equity, allocations, net profit, and adjusted profit for the year) in addition to external sources of funds that do not exceed deductible assets (longterm liabilities, and commitments that were known to have been funded as deducted) after deducting the non- zakatable assets, and zakatable assets, or the adjusted net profit for the year whichever is larger.
Deemed calculation Method: It is a method used by ZATCA in calculating the zakat due on the zakat payer who does not maintain commercial books and statutory accounts. This is because the origin of the zakat base for the zakat payer is based on its statutory records containing the data through which the base can be identified, but when this is not achieved, ZATCA shall form a zakat base according to the information available So that the zakat base can be estimated as closely as possible.

Charitable Endowment (Public)

Any endowment used for charity purposes in general.

Heirs Endowment (Family)

Endowment specified for certain heirs and relatives.

Agent

A person who is authorized to act for, or in place, of a person and to create legal obligations for that person.

Tax Agent

It is the person appointed by a resident taxable person to act on his behalf and carry out his work that creates legal obligations for him (by virtue of his authorization).

Customs Clearing Agent

A person who carries on the business of arranging for the customs clearance of goods and who deals directly with customs for and on behalf of another person.

Abbreviation

AOA	Authorized OECD Approach
C+	Cost Plus
CbCR	Country by Country Report
CE	Constituent Entity
CIT	Corporate Income Tax
CUP	Comparable Uncontrolled Price Method
DEMP	Development, Enhancement, Maintenance, Protection and Exploitation
EBIT	Earnings Before Interest and Taxes
FATCA	Foreign Accounts Tax Compliance Act
FCM	Full Cost Mark up
GCC	Gulf Cooperation Council
MNE	Multinational Enterprise
NCP	Net Cost Plus
OECD	Organization for Economic Cooperation and Development
OPM	Operating Profit Margin
PE	Permanent Establishment
PLI	Profit Level Indicator
PRM	Resale Price Method
PSM	Profit split Method
RETT	Real Estate Transactional Tax
RoA	Return on (Operating) Assets
ROCE	Return on Capital Employed
RoS	Return on Sales
SCRT	Statutory Consolidated Revenue Threshold
SEA	Separate Entity Approach
SPE	Surrogate Parent Entity
TIN	Tax Identification Number
TNMM	Transactional Net Margin Method
TP	Transfer Pricing
UPE	Ultimate Parent Entity
VAT	Value Added Tax
WHT	Withholding Tax
ZATCA	Zakat, Tax and Customs Authority
AC	Air Courier
ACI	Advance Cargo Information
ACI	Advance Container Information
ACIS	Advanced Cargo Information System
API	Advance Passenger Information
APP	Actual Price paid
ATF	Agreement on Trade Facilitation
ATRS	Advance Tariff Ruling System
AV	Actual Value
AVES	Ad Valorem Equivalents
B/D	Bank Draft
B/E	Bill of Exchange
B/E	Bill of Entry
B/L	Bill of Lading
B/P	Bills Payable
B/R	Bills Receivable
B/S	Bill of Sale
B2B	Business to Business
B2C	Business to Consumer
BAC	Blood Alcohol Content
BSR	Basic Service Rate (for Ocean Freight)
BSRA	Basic Service Rate Additional
BTI	Binding Tariff Information
BTU	British Thermal Unit
C&D	Collection and Delivery
C&F	Cost and Freight
C&I	Cost and Insurance
CAN	Air Consignment Note
CD	Cash Discount
CD	Customs Declaration
CD	Controlled Delivery
CDB	Commodity Data Base
CF	Collection Fee
CFR	Cost & Freight
CIF	Cost Insurance & Freight
CIP	Carriage Insurance Paid To
CO	Certificate of Origin
COD	Cash on Delivery
COE	Country of Export
CPD	Carnet du Passage en Douanes (for Vehicles)
CPT	Carriage Paid To
CUSDEC	Customs Declaration
CUSEXP	Customs Express Consignment
CUSPED	Customs Periodic Declaration
CUSREP	Customs Conveyance Report
CUSRES	Customs Response
CV	Customs Value
CVC	Customs Valuation Code
CWO	Cash With Order (or Cash on Delivery)
D/A	Documents Against Acceptance
D/D	Demand Draft
D/O	Delivery Order
DAF	Delivered At Frontier
DDP	Delivered Duty Paid
DDU	Delivered Duty Unpaid
DEQ	Delivered Ex Quay Duty Unpaid
DES	Delivered Ex Ship
EXW	Ex Works
FAS	Free Alongside ship
FCA	Free Carrier
FOB	Free Onboard Vessel
FOW	Free on Wharf or Free on Wagons
FP	Fully Paid
FP	Fast Parcel
GATS	The General Agreement on Trade in Services
GATT	The General Agreement on Tariffs and Trade
MRA	Mutual Recognition Arrangements
MRI	Manifest Review Unit
MRI	Magnetic Resonance Investigation
PCA	Post Clearance Audit
PSI	Pre Shipment Inspection
PTA	Prepaid Ticket Advice
SET	Secure Electronic Transaction
SGD	Single Goods Declaration
SSTL	Smart and Secure Trade Lane
STABEX	Stabilization of Export (GATT)
TBT	Technical Barrier to Trade
WTO	Marrakesh Agreement Establishing the World Trade Organization

This Glossary has been prepared for awareness and educational purposes only, its content is subject to change at any time. It is not considered binding upon the Zakat, Tax and Customs Authority in any way, and it is not considered to be a legal consultation in any way. It cannot be relied upon as a legal reference in itself, it is necessary to always refer to the laws mentioned in the applicable regulations. Any person subject to the Zakat, Tax and Customs Authority laws shall be responsible for verifying their legal duties and obligations, and shall be solely responsible for maintaining discipline and complying with these laws and regulations. The Zakat, Tax and Customs Authority shall not, under any circumstance be held responsible or liable for any damage or loss that may occur to the Taxpayer as a result of his failure to comply with the instructions.