Regulatory Alerts2020-01-26
Collecting Amounts Owed to Finance Entities for Previous Periods in Exchange for VAT on Real Estate Finance Contracts
The Saudi Central Bank confirms that finance entities operating in the Kingdom are entitled to collect previous-period Value Added Tax (VAT) from customers on real estate finance contracts. The circular permits entities to offer flexible settlement options subject to written customer consent prior to payment execution, while reserving the right to pursue competent judicial authorities for unaccepted claims. Non-compliance with these directives will trigger regulatory enforcement actions by the Bank.
In the Name of Allah, the Most Gracious, the Most Merciful
Saudi Central Bank Head Office
Banking Policies Department
Ref. No.: .................................... Date: 1441/06/01 Attachments: None
Circular
Ref. No.: 41038237 Date: 1441/06/01 Attachments: None
To the Respected, Peace, mercy, and blessings of Allah be upon you,
Subject: Collecting Amounts Owed to Finance Entities for Previous Periods in Exchange for VAT on Real Estate Finance Contracts.
I refer to the Value Added Tax (VAT) System issued by Royal Decree No. M/113 dated 02/11/1438H, and the Executive Regulations for the VAT System issued by General Authority of Zakat and Tax (GAZT) Board of Management Resolution No. (3839) dated 14/12/1438H.
The Bank wishes to emphasize the importance for all finance entities of complying with the VAT System, its Executive Regulations, and the guidelines and circulars issued by GAZT in this regard. The Bank also confirms that finance entities are entitled to claim from customers the payment of VAT amounts for previous periods due under real estate finance contracts. To facilitate this for customers, finance entities may offer all possible payment or settlement options in accordance with relevant systems and regulations, provided that written consent is obtained from the customer upon accepting a payment or settlement option and before executing any settlement process for the due amount. Furthermore, if a customer does not accept the available options to settle previous period VAT amounts, the finance entity may resort to the competent judicial authorities to claim payment of those amounts.
For information and necessary action, the Bank will take the required regulatory actions in case of non-compliance with these instructions.
Yours sincerely,
Fahd bin Ibrahim Al-Shathri Deputy Governor for Supervision
Distribution Scope:
- Banks operating in the Kingdom.
- Finance companies operating in the Kingdom.
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