The Saudi General Authority of Zakat and Tax (GAZT) has issued a release that clarifies the value added tax (VAT) zero-rating and exemptions for select goods and services as provided in the implementing regulations for Saudi Arabia's new VAT regime, which will be introduced on 1 January 2018.

Zero-rated goods and services include:

• The supply of certain medications and medical equipment specified by the Ministry of Health and Saudi Food and Drug Authority;
• The supply of gold, silver, and platinum that is for investment purposes that is at least 99% pure and tradable in the international market;
• Any exports destined outside the GCC region;
• Services supplied to non-GCC residents; and
• International transport services of goods and people, the supply of qualified international transport vehicles, and related services such as the supply of spare parts, maintenance, repair, etc.

Exempted supplies include certain financial services and the rental of residential real estate. Further, any activity exercised by a government body in its capacity as a public authority is not considered to be an economic activity and as such, falls outside the VAT scope and is not subject to VAT.

In a separate release, the GAZT further clarifies the exemption for financial services supplies, which covers:

• Interest or lending fees charged with an implicit margin, such as loans and credit cards, mortgages, and financial leasing;
• Transactions involving money and securities;
• Operation of current, deposit, and savings accounts; and
• Provision or transfer of a contract of life insurance or the reinsurance of a life insurance contract.

The VAT exemption excludes cases where consideration payable in respect of the service is by way of an explicit fee, commission, or commercial discount, including fees on money transfers.