VAT in Saudi Arabia: a guide for small businesses

What is the VAT rate in Saudi Arabia?

The standard VAT rate in Saudi Arabia is 15%, and it applies to most goods and services sold in the Kingdom. Some supplies are zero-rated, such as exports of goods, and some are exempt, such as most financial services and the rent of a home. Zero-rated sales count towards your registration threshold; exempt sales do not.

When must a business register for VAT?

You must register when your taxable supplies in the past 12 months exceeded SAR 375,000, or are expected to exceed it in the next 12 months. Between SAR 187,500 and SAR 375,000 you may register voluntarily. Below SAR 187,500 you cannot register, so you do not charge VAT or issue tax invoices.

The same two figures decide the e-invoicing waves: SAR 375,000 for Wave 24 and SAR 187,500 for Wave 25.

What must a tax invoice show?

A sale to another business needs a standard tax invoice, and a sale to a consumer can use a simplified tax invoice. Since 4 December 2021 both are issued as e-invoices from invoicing software. ZATCA's guideline on tax invoicing lists every detail; the main ones on a standard tax invoice are these:

• The words "tax invoice", the date of issue and a sequential invoice number.
• The seller's name, address and VAT registration number.
• The buyer's name, address and, if registered, VAT registration number.
• Each line's description, quantity, unit price, VAT rate and VAT amount.
• The total before VAT, the VAT and the total including VAT, in riyals.

A simplified tax invoice shows less, and carries a QR code with the seller's name, VAT number, time, total and VAT.

How do you add or remove 15% VAT?

To add VAT, multiply the price before VAT by 1.15: SAR 1,000 becomes SAR 1,150, of which SAR 150 is VAT. To find the VAT inside a price that already includes it, multiply that price by 15 and divide by 115. To find the price before VAT, divide the price including VAT by 1.15.

1. Start from the price before VAT, or the price including VAT if that is what you have.
2. To add VAT, multiply the price before VAT by 0.15 and add the result to it.
3. To take VAT out, divide the price including VAT by 1.15: the result is the price before VAT.
4. Subtract the price before VAT from the price including VAT to get the VAT.
5. Round each amount to two decimal places, the halalas shown on the invoice.

How often do you file a VAT return?

If your annual taxable supplies exceed SAR 40 million you file a VAT return every month; otherwise you file every quarter. Each return is due by the last day of the month after the period ends, and the VAT due is paid by the same day. A credit note for an earlier period goes in the adjustment column.

How DynamoOS handles VAT

Every sales and purchase invoice in Dynamo Finance carries the VAT of each line. The Saudi Arabia pack prepares the VAT return from those invoices box by box, with the invoices behind each figure, and puts credit notes for earlier periods in the adjustment column. The pack is included at no charge with every plan.