(SAU) Country-specific Sales tax functionality update - Microsoft Dynamics AX 2012 R3

The Value Added Tax (VAT) law was published in KSA's official gazette (UM AL-QURA) in its issue number 4681 dated 28 July 2017.

The VAT law indicates that VAT will enter into force from the start of the fiscal year following the date of its publication in the official Gazette, i.e. 1/1/2018. In addition, it gives taxable persons in KSA 30 days from the date of publication of the VAT law to register with GAZT.

The VAT Law defines the introduction of VAT outlined in the Unified Agreement for VAT of the Cooperation Council for the Arab States of the Gulf, it will be applied on 1st January 2018 (H1439/4/14).

The VAT Law was officially approved and published on H1438/11/4.

In order to access the VAT Law, please follow the file of SaudiVATlaw-bilingual.

The VAT Implementing Regulations expanded on the areas cover within the KSA VAT Law, detailing rules for implementation and giving taxpayers sufficient information to complete their VAT compliance requirements. The Implementing Regulations cover: 

The VAT Implementing Regulations were officially approved on H1438/12/4.

In order to access the VAT Implementing Regulations, please follow the file of Value-Added-Tax-Approved-Implementing-Regulations-Bilingual.

Follow the link below to download update for Microsoft Dynamics AX 2012 R3:

Download update for Microsoft Dynamics AX 2012 R3

New functionality has been developed in addition to the standard Sales tax functionality:

1. Reverse charge mechanism for GCC/domestic purchase.
2. Type of tax, Sales tax description in different languages, and new Country/Region type GCC are implemented in the Sales tax codes form.

Sales tax types include:

• Standard VAT
• VAT 0%
• Reduced VAT

3. Invoice output form in Arabic and Customer language.

See the detailed information about the standard sales tax functionality under the following links:

• Setting up sales tax authorities
• Set up a sales tax settlement period
• Ledger posting groups
• Sales tax exempt codes
• Sales tax reporting codes
• Setting up sales tax codes
• Setting up sales tax groups and item sales tax groups
• Set up conditional sales taxes (is used for cash accounting basis)
• Set up a tax registration type

The following modifications are made in the Sales tax form:

1. New Type of tax field is added with value list: Standard VAT, Reduce VAT, VAT 0%.
2. New GCC value of Country/ Region type is added.
3. New button of Tax directives for Sales tax description in different languages is added.

See screenshot below:

New Reverse charge functionality is added to Saudi context.

In cases when a Taxable Customer is obligated to pay Tax on a Supply received from a non-resident Supplier, Tax should be paid by way of the Reverse Charge Mechanism. The Taxable Customer must report the Output Tax on the Supply and any Input Tax (see Regulations to VAT law (Article forty-seven: Persons liable to pay Tax)).
It is necessary to select the Reverse charge check box in the Account payable parameters form (see screenshot below) in order that this functionality may work.

Before setting sales tax group, you should set up two sales tax codes: one for input sales tax and other for output sales tax. Output sales tax code should be set up with a negative value. For more information, see Setting up sales tax codes. 

It is necessary to select the Reverse charge check box on the line with the negative sales tax rate (see screenshot below) in the sales tax group. 

When posting the invoice, the system will create two sales transactions: one with Sales tax receivable direction and other with Sales tax payable direction. The system changes the direction in the sales tax transaction with a negative sales tax value if the Country/Region type in the Sales tax code is equal to GCC or Domestic.

If the language which is set up in the Legal entity form is different from the Customer/Vendor languages set up in the Customer/Vendor form, the system outputs the invoices in two languages.

A user should set up Name/Description of items in different languages in the Released product form, and also Exempt code and Sales tax description.

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