Where is your company based?
VAT-registered businesses in an EU member state are eligible to recover VAT on business costs from A VAT Refund Saudi Arabia Guide under the EU VAT Refund Directive.
VAT-registered businesses outside of the European Union are eligible to recover VAT on business costs from A VAT Refund Saudi Arabia Guide under the 13th Directive.
Saudi Arabia’s VAT Rates:
Low or no taxes have long been a hallmark of Gulf states like Saudi Arabia and the United Arab Emirates. However, to diversify revenue streams in the face of falling oil prices, the Kingdom of Saudi Arabia introduced a value-added tax or VAT rate of 5% in 2018. As one of the first countries in the region to develop a VAT, all eyes are on how this new program will continue to change—and change the region.
Already, the Kingdom has tripled the initial standard rate to arrive at a VAT rate of 15%. This VAT increase occurred near the beginning of the COVID-19 pandemic—when most other countries were lowering VAT rates.
Current Rates in Saudi Arabia
Saudi Arabia’s VAT scheme is relatively simple, comprising only two rates:
- Standard (15%) – The standard rate applies to all food and beverages, domestic transportation, commercial real estate leasing, private education and healthcare services, and domestic oil and gas products.
- Zero (0%) – Zero-rated products and services include international transportation, maintenance and repair costs for qualified vehicles, medicine, medical equipment, and exports.
Interestingly, while private education and healthcare services are subject to VAT, the Saudi Arabian government will cover these taxes for its citizens.
How to Pay Your VAT Bill in Saudi Arabia
If you exceed the monthly threshold of SAR 375,000 (approximately USD 100,000), you must register with the Saudi tax authorities within 20 days.
Businesses with annual taxable supplies exceeding 40 million Saudi riyals (USD 10 million) must file monthly, while businesses below that threshold will instead file quarterly. All payments are due by the last day of the month following the end of each tax period. To submit your VAT return online, log into the government e-portal and follow the steps for VAT submission.
VAT payments are to be made to the General Authority of Zakat and Tax (GAZT) via bank transfer using the SADAD payment system (a central invoicing system designed by the Saudi Arabian Monetary Agency). SADAD facilitates payments through ATMs, as well as via online banking.
Saudi Arabia VAT Compliance
To avoid penalties and fines, it’s worth familiarizing yourself with Saudi Arabia’s VAT regulations. VAT compliance requirements mandate that you:
- Keep all accounts and records (in Arabic) for at least six years
- Hire a Saudi tax representative to oversee invoicing and documentation
- Convert all foreign payments to Saudi riyals before submission
- Submit all returns on time
If you are owed a credit for any reason, you must request your refund as you file your VAT return. Compliance with VAT refund Saudi Arabia regulations entails that you provide an IBAN (international bank account number) with your report linked to your company or personal identification number.
Saudi Arabia’s VAT implementation is still in its early stages. As such, deciphering all of the VAT rules and regulations can be challenging. If you need support with obtaining a VAT refund, navigating Saudi Arabia’s changing policies, or submitting a return, VAT IT is here to help.
BBC. Saudi Arabia and United Arab Emirates introduce VAT for first time. https://www.bbc.com/news/business-42508883
Al Arabiya. Saudi Arabia will consider cutting VAT rate: Finance minister. https://english.alarabiya.net/business/economy/2022/05/24/Saudi-fiscal-sustainability-to-target-reserves-not-falling-below-certain-GDP-pct-Min
Zakat, Tax and Customs Authority. Value Added Tax (VAT). https://zatca.gov.sa/en/RulesRegulations/VAT/Pages/default.aspx
Zakat, Tax and Customs Authority. VAT General Guideline. https://zatca.gov.sa/en/RulesRegulations/VAT/Documents/VAT_Guideline_Agents_EN.pdf