Saudi Arabia introduced VAT on 1 January 2018 at 5%, and raised it to 15% on 1 July 2020. It is administered by the Zakat, Tax and Customs Authority (ZATCA). If you sell goods or services in Saudi Arabia, here is how it works.
The basic mechanics
A registered business charges 15% VAT on its sales (output tax), deducts the VAT it paid on business purchases (input tax), and pays ZATCA the difference.
Example. In a quarter, a company sells SAR 300,000 of services and charges SAR 45,000 VAT. It buys SAR 100,000 of supplies and pays SAR 15,000 VAT. It pays ZATCA SAR 45,000 − SAR 15,000 = SAR 30,000.
Use our Saudi VAT calculator to add or remove 15%.
Zero-rated supplies (0%, input VAT recoverable)
- Exports of goods outside the GCC, and certain services to non-residents
- International transport of goods and passengers
- Qualifying medicines and medical equipment
- Investment-grade gold, silver and platinum
Exempt supplies (no VAT, input VAT not recoverable)
- Certain financial services, such as margin-based lending
- Life insurance and reinsurance
- Residential rent
Real estate
Sales of real estate are generally outside VAT and subject to the separate 5% Real Estate Transaction Tax (RETT), introduced in October 2020. Commercial leases remain subject to VAT.
Registration
| Threshold | Amount |
|---|---|
| Mandatory | SAR 375,000 of annual taxable supplies |
| Voluntary | SAR 187,500 of annual taxable supplies or expenses |
Check your position with the Saudi VAT registration checker and read our registration guide.
Returns
- Monthly returns if annual taxable supplies exceed SAR 40 million
- Quarterly returns otherwise
Returns and payment are due by the last day of the month following the end of the tax period.
E-invoicing
Saudi Arabia was early to e-invoicing. Phase 1 (generation) started in December 2021, and Phase 2 (integration with ZATCA) has been rolled out in waves since January 2023. See ZATCA e-invoicing Phase 2.
Saudi VAT vs UAE VAT
| Saudi Arabia | UAE | |
|---|---|---|
| Rate | 15% | 5% |
| Return due | End of following month | 28 days after period end |
| E-invoicing | Live, integration in waves | Mandatory from 2027 |
| Property sales | 5% RETT | VAT rules apply |
Consumer prices include VAT
Prices shown to consumers must include VAT. A shelf price of SAR 115 contains SAR 15 of VAT.
Common mistakes
- Charging 5% out of habit from the UAE, or quoting UAE prices to Saudi customers without adjusting
- Showing consumer prices without VAT
- Treating real estate sales as subject to VAT instead of the 5% RETT
- Issuing invoices from software that does not meet ZATCA’s e-invoicing rules
- Forgetting to account for VAT under the reverse charge on services bought from abroad
Frequently asked questions
Does Saudi VAT apply to GCC customers?
Supplies to customers in other GCC states are treated according to the GCC agreement and Saudi rules. In practice, check the specific treatment for goods and services before zero-rating them.
Is there VAT on salaries?
No. Salaries paid to employees are not supplies for VAT purposes.
Can a non-Saudi company charge Saudi VAT?
A non-resident making taxable supplies in Saudi Arabia may have to register and charge VAT, usually through a tax representative.
