The Zakat, Tax and Customs Authority "ZATCA" published the rules for value-added tax "VAT" refund by real estate developers on 07/29/2022. The rules contained amendments and interpretations of what was mentioned in the guideline, the most notable of which are:
1- It is mandatory for the Minister of Finance to approve the list of licensed real estate developers:
The rules states that ZATCA will reviews the application and verifies that the licensed real estate developer fulfills all the requirements and standards mentioned in the ministerial decision. It may request documents that confirm this, and if it is verified, ZATCA uploads a list of the names of real estate developers who meet all the qualification requirements and standards to the Minister of Finance to approve.
2- Modifying the refund request period:
Refund requests may only be submitted for taxes incurred for each quarterly period; or for each calendar year; and there is no effect of considering the taxable person obligated to the monthly or quarterly tax period; the right to submit requests is limited to the previous two terms.
While the rules stipulate that it may be submitted for a monthly period, as it's mention that a qualified real estate developer may submit a refund request in relation to each monthly, quarterly or calendar year period to refund the value-added tax paid during that period according to what is specified in the registration application and in accordance with the procedures specified by the Authority.
3- Adding a new paragraph about not being entitled to refunds of simplified tax invoices:
When submitting a refund request to ZATCA, the qualified real estate developer must possess the books, records, and documents proving his eligibility for the refund, especially the tax invoice related to the supply subject to the refund, issued in the name of the qualified real estate developer and containing all the details of the goods or services related to the property subject to the refund request, in addition to The documents proving the payment of the tax being refunded, and the qualified real estate developer may not claim a refund of the tax paid under simplified tax invoices that do not bear the name of the qualified real estate developer.
4- Requirements and explanations for leasing contracts and off-plan sales:
The real estate developer must be in possession of that property as a buyer under a financial lease contract ending with ownership or a lease contract ending with ownership from a legally licensed entity. This is provided that all of the following conditions are met:
1-The contract must include the lessee’s right to own the property or the promise of it.
2-The contract must include a payment schedule that specifies the value of the property rent and the value of the ownership right separately.
3-The lessee must have regular accounts (financial statements) throughout the contract’s validity period.
That the property subject to the redemption request is designated for one of the off-plan sale projects, and is being developed by the qualified real estate developer under a partnership agreement between the developer and the person who owns the property, provided that the disposition of the property subject to redemption has been disclosed in favor of the qualified real estate developer. For recovery
Lastly , the property must be designated for one of the off-plan sale projects, provided that the property is owned by the state and allocated to the Ministry of Municipal, Rural Affairs and Housing and is developed by a qualified real estate developer under a partnership agreement between the developer and the Ministry, directly or indirectly.
Source: (Umm Al-Qura Newspaper)
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