What is Reverse Charge Mechanism? (VAT)

    2 years ago


What is Reverse Charge Mechanism? (VAT)

Normally, the supplier of goods or services pays the tax on supply. In the case of Reverse Charge, the receiver becomes liable to pay the tax to the government (Reversed). As per Saudi VAT Law any sales (B2B) between registered dealers in the GCC will be subject to reverse charge mechanism. 

Reverse Charge

 

When a transaction is subject to Reverse Charge, the recipient of the goods or services reports both their purchase (input VAT) and the supplier’s sale (output VAT) on their VAT return.  These two declarations offset each other from a cash payment point of view, but the authorities have full visibility of the transactions.

When Reverse charge mechanism apply

  1. Services received from GCC or non-GCC country and invoice not included the VAT.
  2. Goods purchased from GCC or non-GCC country where VAT not collected by customs authority. 

Recent Comments 2

  • By: Anonymous one year ago
    Services received from GCC or non-GCC country and invoice not included the VAT. this is not correct,what if you import service from china with VAT.
  • By: Anonymous one year ago
    it will not not apply for goods.

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