Value Added Tax (VAT) in Saudi Arabia:
Value Added Tax (VAT) is a consumption tax imposed on most goods and services in Saudi Arabia. Introduced in 2018 at a rate of 5%, it was later increased to 15% in 2020 to support economic diversification under Vision 2030.
1. What is VAT & How Does It Work?
VAT is a consumption tax applied at each stage of the supply chain, but ultimately paid by the end consumer. Businesses act as tax collectors, charging VAT on sales and reclaiming VAT paid on purchases.
Standard VAT rate: 15% (since July 2020)
Zero-rated (0%): Some goods/services are taxed at 0% (exported goods, international transport).
Exempt supplies: No VAT is charged (e.g., certain financial services, residential rent).
2. Which Goods & Services Are Subject to VAT?
Taxable at 15% (Standard Rate)
Most goods and services, including:
✔ Retail sales (electronics, clothing, cars)
✔ Restaurants, cafes, and food delivery
✔ Hotels and entertainment services
✔ Professional services (consulting, legal, accounting)
✔ Telecom and digital services
Zero-Rated (0% VAT)
✔ Exported goods (outside GCC)
✔ International transportation (air, sea, land)
✔ Certain medical equipment & medicines
✔ Investment-grade precious metals
Exempt from VAT (No Tax Applied)
✖ Sale/rent of residential properties (for living purposes)
✖ Certain financial services (Islamic banking, loans)
✖ Healthcare & education services (with some conditions)
. VAT Registration Requirements
Mandatory Registration (Required by Law)
If your annual taxable supplies exceed SAR 375,000 (about $100,000).
If you expect to exceed this threshold in the next 12 months.
Voluntary Registration (Optional)
If your annual taxable supplies exceed SAR 187,500 (but are below mandatory threshold).
How to Register?
Create an account on the ZATCA (Zakat, Tax, and Customs Authority) portal: https://zatca.gov.sa
Submit required documents (Commercial Registration, bank details, financial statements).
Receive VAT certificate (usually within 5-7 working days).
4. How to File & Pay VAT in Saudi Arabia
VAT Filing Deadlines
Monthly: If annual taxable supplies exceed SAR 40 million.
Quarterly: For most businesses (default filing period).
Steps to File VAT Returns
Log in to the ZATCA portal.
Submit VAT return (Form VAT 300) with details of:
Output VAT (collected from sales)
Input VAT (paid on purchases)
Net VAT payable (Output VAT – Input VAT)
Pay the due amount via SADAD or bank transfer before the deadline.
VAT Payment Due Dates
Monthly filers: By the 28th of the following month.
Quarterly filers: By the 28th after the quarter ends.
5. Penalties for Non-Compliance:
| Violation | Penalty (SAR) |
|---|---|
| Late VAT registration | 10,000 |
| Late VAT filing | 5% of tax due (up to 25%) |
| Late VAT payment | 5% of unpaid tax + 1% monthly interest |
| Incorrect VAT return | 50% of tax difference (if underreported) |
| Failure to issue tax invoices | 5,000 per violation |
6. Key Takeaways for Businesses
✔ VAT is 15% for most goods/services in Saudi Arabia.
✔ Mandatory registration if annual sales exceed SAR 375,000.
✔ File returns quarterly (or monthly for large businesses).
✔ Keep accurate records for 5 years (ZATCA may audit).
✔ Use approved e-invoicing (FATOORA) for B2B transactions.
