Reimburse Employees for actual expenditures incurred for business

    one year ago

Reimburse Employees for actual expenditures incurred for business

In cases where it can be clearly evidenced that the Employee has received a supply of goods or services as a required part of his employment duties, and for the purposes of input tax deduction or refund, GAZT will generally accept that the Employee incurs the cost on behalf of the Employer, provided that the Employer proves that he has actually incurred the cost paid by the Employee (including VAT as appropriate) and that the supply is therefore received by the Employer in the course of the Economic Activity of the Employer.

Example (3): Al Qimmah Consulting Company requires Faisal to attend a supplier conference in Dammam on 20 April, 2018. Faisal stays at the hotel where the conference is held on 19 and 20 April and incurs the accommodation cost including the VAT of 5%. The Company reimbursed Faisal for the total accommodation costs incurred. If the Company can evidence that this was carried out as a requirement of Faisal’s work duties which are related to the Company’s economic activities, the Company can account for the expenditure directly and may be eligible for input VAT deduction if the relevant criteria are met.

In other cases, an Employer may authorize reimbursement of private expenditure. In this case, there is no supply made to the Employer by the Employee or others. These expenditures will be considered as not related to the economic activity and will not be eligible for input tax deduction. 

Example (4): Muna has performed strongly against all employment targets during 2018. Her Employer agrees to reimburse a purchase of electronic equipment for her house as a reward. Muna visits a local store and selects a television priced at SAR 3,150 (inclusive of VAT). In this case, the supply of goods is made directly from the local store to Muna. Her Employer will not be entitled to deduct input VAT on the television.


Gazt VAT Guideline

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