Value Added Tax

An Overview

Date |
What is VAT?

Value Added Tax, popularly know

as ‘VAT’, is a special type of
indirect tax in which a sum of
money is levied at a particular
stage in the sale of a product or
service.

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Points for Consideration

• VAT is not a Revenue

• VAT is not a Cost
• All SBM Products and Services are subject to VAT
@5%
• All SBM Customers are subject to VAT
• SBM Selling price will remain without VAT value.
• Selling price will appear in all SAP Documents
including Master contract, PNL, Quotation, SBO,
Sales Order and relevant reports. (without VAT)

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Points for Consideration

• SBM Selling price calculation will not be effected by

Input VAT.
For Instance:

Description Price VAT (%) Vat Amount

Vendor Quote 2,000 5 100
Manpower Charges 3,400
Total Cost 5,400
SBM GP 10% 600
SBM Selling Price 6,000

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Points for Consideration

• SBM Proposal will clearly specifies the Selling price

and applicable VAT (This can be text only or as
calculated value to be decided by BMCU).

• All invoices issued to customer from 01.01.2018 will

have system calculated VAT as shown below@5%.

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Points for Consideration

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Points for Consideration

• All local vendors (registered with GAZT) will invoice

SBM with 5% VAT
• SBM Finance will record VAT from vendors at the time
of Vendor Invoice Posting.
• VAT claims from Customer is termed as "Output VAT" -
Payable to GAZT
• VAT payable to vendor is termed as "Input VAT" -
Recoverable from GAZT
• SBM has a responsibility towards GAZT to collect
applicable VAT.
• SBM has to report on monthly basis the value of
Output VAT and Input VAT

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Points for Consideration

• The difference between Output VAT and Input VAT

is claimable or payable to GAZT
• All Foreign purchases H/W which routed from
Customs 5% VAT is applicable and will be paid to
CUSTOMS
• All Foreign purchases S/W and Services VAT will be
calculated posted by SBM Finance as "Reverse
Charge Mechanism".
• This is SBM responsibility to deal with vendors
which are VAT registered.
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Points for Consideration

• As per transition clause VAT will not be applicable

during 2018 for contracts which complies the
following points.
• a) Contract Effective Date is before 30.05.2017
• b) Customer is entitled to deduct Input Tax in
respect of the Supply of Goods or services in full
or is an eligible person entitled to a refund of
the Tax
• c) Customer provides a certificate that "He is able
to get the full value of VAT charged out or
refunded"

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Points for Consideration

• BMCU and Business Operations will jointly make

sure to get the above points cleared before
submitting any invoice to customer in 2018
• SBM should not be charged VAT during 2018 from
vendors where the PO/Contract effective date is
before 30.05.2017
• This is the responsibility of LOBs, Procurement and
Finance to check above points while receiving
Vendor invoices.

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Points for Consideration

In case of Goods import from GCC :-

• Vendor will not add VAT

• For Goods VAT will be paid at Saudi Customs
• For SW and Services VAT transaction will be
recorded by Finance as "Reverse Charge"
mechanism with no overall impact

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Points for Consideration

In case of Goods import from Other Countries:-

• Vendor will not add VAT

• For Goods VAT will be paid at Saudi Customs
• For SW and Services VAT transaction will be
recorded by Finance as "Reverse Charge"
mechanism with no overall impact

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Points for Consideration

Thank You.

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