VAT in Saudi Arabia: the basics

The essentials

VAT in Saudi Arabia is charged at 15% on most goods and services. A business registered for VAT charges it on its sales, recovers the VAT it pays on its purchases, and pays the difference to ZATCA with each return. Some supplies are zero-rated, such as most exports, and some are exempt, such as certain financial services and residential rent.

Who must register

• Registration is mandatory when taxable supplies over the last 12 months, or expected over the next 12, exceed SAR 375,000.
• Registration is voluntary between SAR 187,500 and SAR 375,000.
• A non-resident making taxable supplies in the Kingdom must register regardless of value, where no one else accounts for the VAT.
• Apply within 30 days of crossing the threshold; late registration carries a penalty of SAR 10,000.

Returns and payment

• Monthly returns if annual taxable supplies exceed SAR 40 million; quarterly returns otherwise.
• Each return and payment is due by the last day of the month after the period ends.
• Late filing carries a penalty of 5% to 25% of the tax due, and late payment 5% of the unpaid tax for each month or part of a month.

Where companies go wrong

• Claiming input VAT on invoices that do not meet the requirements, or are not in the company’s name.
• Charging no VAT on services to foreign customers that do not qualify for zero rating.
• Preparing the return from a spreadsheet that does not match the accounts.
• Not keeping records: invoices and accounts must be kept for at least six years, and longer for records on capital assets and real estate.

How we run it

We register our clients, keep the VAT accounts reconciled each month, prepare and file the returns, and answer ZATCA queries with the records ready.