Article 12 of the Saudi Value Added Tax Law

المادة 12 من نظام ضريبة القيمة المضافة · الفصل الثالث: توريدات السلع والخدمات

The article refers to the Regulations the conditions for aggregating the turnover of related persons with similar or interrelated activities, and for registering them on the basis of total turnover.

Official text (Arabic)

This article has not been amended since the law was issued.

تحدد اللائحة الشروط والضوابط اللازمة لتجميع رقم أعمال الأشخاص المرتبطين الذين يزاولون أنشطة متشابهة أو مترابطة، وتسجيل كل منهم أو تسجيلهم إلزامياً على أساس رقم الأعمال الإجمالي.

This is the official Arabic wording, the only legally binding version. We do not translate the law itself; the explanation below is ours. Official source: Bureau of Experts at the Council of Ministers

Article 12 explained in plain English

This article deals with the position of related persons who carry out similar or interrelated activities. The turnover of each one alone may be small, while the total of their businesses is large.

What does the article provide? It leaves it to the Regulations to set the conditions and controls for two things:

Aggregating the turnover of these related persons, that is, adding their turnovers together.
Mandatory registration of each of them, or of them as a group, on the basis of the total turnover after aggregation.

It follows that the Law allows the combined business of related persons to be considered when deciding whether registration is mandatory, as the Regulations specify, instead of looking at each person's turnover separately.

What the article does not specify: it does not define who a "related person" is, what similar or interrelated activities mean, or the turnover thresholds. Terms not defined in the Law are taken from the Agreement under Article 1, while the conditions and controls are found in the Regulations.

The article is linked to Article 11, which refers to the Regulations the criteria for calculating the value of expected annual supplies. Anyone who owns more than one business in a similar line of activity is advised to consult a lawyer specializing in tax or companies to learn the effect on their registration.

Practical example

Khalid owns three sweet shops in Riyadh, each with a separate commercial registration, and the turnover of each shop alone is small. Because the shops are related and carry out a similar activity, their turnover may be aggregated and he may be required to register on the basis of the total, if the conditions and controls set by the Regulations apply.

Translated from our Arabic explanation with machine assistance. For guidance only; it does not replace advice from a lawyer on your situation.

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