Article 40 - Adjustment to value of a Supply

1) The value of a Supply is adjusted in the following cases where in relation to a Taxable Supply by a Taxable Person:

a) the Supply is cancelled or terminated after the Supply has taken place or been treated as taking place, in whole or in part,

b) there is a material change or alteration to the nature of the Supply resulting in a change in the Tax charged,

c) the previously agreed Consideration for the Supply is altered for any reason, including due to an offer of an additional discount after the sale was made,

d) the Goods or services or part thereof are returned to the Supplier and the Supplier accepts such return.

2) Where the value of the Supply is adjusted because any of the cases described in the first paragraph of this article has occurred, an adjustment to Tax previously reported must be made in accordance with the third paragraph of this article if the Supplier has both:

a) issued a Tax Invoice in relation to the supply and the amount shown therein on the basis of which the Tax due has been calculated does not reflect the occurrence of one or more of the cases provided for in the first paragraph of this article or the cases provided for in the Agreement,

b) accounted for an amount of Tax that does not reflect the occurrence of one or more of the cases provided for in the first paragraph of this article.

3) To effect an adjustment to Tax previously reported, the Taxable Person who acts as Supplier must adjust the Output Tax previously reported to reflect the amount of Tax calculated on the change in Consideration.

4) An adjustment that results in an increase to Supplier’s Output Tax made in accordance with the third paragraph of this article must be made in the Tax Return for the Tax Period in which the event referred to in the first paragraph of this article occurred.

5) An adjustment that results in a decrease in Supplier’s Output Tax made in accordance with the third paragraph of this article must be made in the Tax Return for the Tax Period in which the event referred to in the first paragraph of this article occurred or in the Tax Return for the period during which the Credit Note was issued to the Customer, whichever is later.

6) In the cases prescribed by the second paragraph of this article which require an adjustment to the value of a supply of Goods or services to a Customer who is or was a Taxable Person on the date of the supply, the Customer must correct its Input Tax to reflect the Tax amount calculated on the change in Consideration in the Tax Period in which the Credit Note or Debit Note is issued.

7) In cases where a Taxable Person does not receive all or part of the Consideration for a Taxable Supply made by him, the Taxable Person may reduce his Output Tax for the Tax amount calculated on the Consideration not paid in the Tax Return in which all of the following conditions are met:

a) the Taxable Person has previously included Tax calculated on the Taxable Supply as Output Tax on a Tax Return and made payment of the Tax due,

b) the Consideration is in respect of a Supply of Goods or services made to a Person who is not a Related Person,

c) a period of at least twelve months has passed from the date of the Taxable Supply,

d) the Taxable Person holds a certificate from his certified accountant indicating that the unpaid Consideration has been written off in his books,

e) in cases where the total amounts unpaid by the Customer exceed one hundred thousand (100,000) riyals, formal legal procedures have been taken to collect the debts without success and the Taxable Person can provide evidence of these procedures, such as the issuance of a judicial ruling, evidence of the debtor’s bankruptcy or a court order initiating any other formal recovery procedure.

8) A person using the cash accounting basis described in article forty-six of these Regulations must not make any adjustment for non-payment prescribed in the seventh paragraph of this article.

9) If an adjustment to Output Tax is made in accordance with the seventh paragraph of this article and the Taxable Person subsequently receives full or partial payment of the Consideration, Tax calculated on the subsequent Consideration received will become payable and must be accounted for in the Tax Return for the Tax Period in which the payment occurs, and a new Tax invoice must be issued to reflect the additional amount received.

10) Any Taxable Person who has deducted Input Tax in respect of a Supply received by that Person, but has failed to make payment in full after a period of twelve months from the date of Supply, must reduce the Input Tax deduction by the amount of Tax calculated on the Consideration not paid at that date.

11) In cases where an adjustment to Input Tax is made under the tenth paragraph of this article and the Taxable Person subsequently makes payment of the Consideration, the Input Tax deduction may be increased correspondingly to reflect the Tax calculated on the Consideration paid.

12) The adjustments required by this article are subject to any time limits imposed by the Law or these Regulations.