Saudi Arabia VAT System – Complete Guide

📘 What is VAT in Saudi Arabia?

Saudi Arabia introduced Value Added Tax (VAT) on January 1, 2018, under the unified Gulf Cooperation Council (GCC) VAT Agreement. The tax is administered by the Zakat, Tax and Customs Authority (ZATCA) and applies to most goods and services sold in the Kingdom.

It is a consumption-based indirect tax where the end consumer bears the cost, while businesses collect and remit the VAT to the authority.

📊 VAT Rates in Saudi Arabia

🔹 Standard VAT Rate: 15%

Applies to most taxable goods and services (since July 1, 2020).

🟢 Zero-rated (0%)

Applies to specific supplies such as:

• Exports outside the GCC
• International transport
• Certain medicines and medical devices
• Investment-grade precious metals

🚫 Exempt Supplies

No VAT is charged on:

• Certain financial services
• Residential rent
• Education and healthcare (under strict conditions)

🏢 Who Should Register for VAT in Saudi Arabia?

✅ Mandatory VAT Registration:

A business must register if:

• Annual taxable turnover exceeds SAR 375,000
• Non-resident businesses making taxable supplies in Saudi Arabia

📝 Voluntary Registration:

• Available for businesses with turnover above SAR 187,500

Digital businesses outside KSA must also register if offering taxable services (e.g., software, ads, streaming) to Saudi customers.

🌐 VAT & Foreign Digital Services

📱 Non-resident suppliers of digital/electronic services to consumers in Saudi Arabia must:

• 📌 Register for VAT through ZATCA’s Non-Resident VAT Portal
• 🧾 Charge 15% VAT on B2C sales
• 🔄 File returns quarterly

Examples:

• Streaming (Netflix, Spotify)
• Online ads (Google, Meta)
• SaaS platforms (e.g., Zoom, Canva)
• Mobile apps and games

🔢 VAT Number Format in KSA

A registered entity receives a 15-digit VAT identification number from ZATCA.

Format: 3XXXXXXXXXXXXXXX

• Starts with "3"
• Shown on all invoices and returns

🧾 Invoice Requirements in Saudi Arabia

Registered businesses must issue tax invoices for B2B and B2C transactions.

Invoice must include:

• Supplier and buyer name & VAT number
• Unique invoice number and date
• Description of goods/services
• Net amount, VAT rate, and VAT amount
• Total invoice amount (with VAT)

🖨️ E-invoicing is mandatory in Saudi Arabia under FATOORAH regulations.

🧮 VAT Calculation Example

Example:

A business sells consulting services worth SAR 10,000

• VAT @ 15% = SAR 1,500
• Total Invoice Amount = SAR 11,500
• If eligible input tax = SAR 500
• Net VAT payable to ZATCA = SAR 1,000

📅 VAT Return Filing in Saudi Arabia

🗓️ Filing Frequency:

• Monthly: If annual revenue > SAR 40 million
• Quarterly: If annual revenue ≤ SAR 40 million

⏰ Due Dates:

• Within 1 month after the end of the filing period
• Payment must be made along with return

💻 Filing Portal:

• ZATCA Portal: https://zatca.gov.sa

📦 Imports & 🌍 Exports

Imports:

• VAT is charged on all imports at 15%
• Collected at the customs stage

Exports:

• Exports outside GCC are zero-rated
• Proper documentation is required to claim zero-rating

🚫 VAT Exempt Goods & Services

• Financial services (without explicit fee)
• Life insurance
• Certain educational and healthcare services
• Residential rent

⛔ No input VAT recovery is allowed for exempt supplies.

✅ Compliance Checklist for VAT in Saudi Arabia

• ✔️ Register with ZATCA if eligible
• ✔️ Issue e-invoices with correct format and VAT ID
• ✔️ File VAT returns on time
• ✔️ Pay due VAT electronically
• ✔️ Maintain all records for at least 6 years
• ✔️ Comply with e-invoicing Phase 2 (integration with ZATCA)
• ✔️ Understand zero-rated vs exempt to avoid errors

📌 Conclusion

Saudi Arabia’s VAT system is one of the most digitally advanced in the Gulf region. Businesses local and international must ensure compliance with evolving VAT and e-invoicing laws. Whether you're a trader, service provider, or digital platform owner, staying VAT-compliant is crucial.

👉 Try our Saudi Arabia VAT Calculator at GSTCal.org to simplify your tax calculations and stay updated!