General questions about VAT in Saudi Arabia - FAQs

What is VAT?

VAT is an indirect tax which is imposed on goods and services bought and sold for business in the KSA.

VAT is imposed on a product at each stage of its production before the final sale.

At each stage of the supply chain, the seller collects VAT from the buyer on behalf of the government. Because the buyer in each stage becomes the seller in the next stage, the entire liability for VAT ultimately falls on the final consumer in the supply chain.

When will VAT be implemented? 

VAT is going to be implemented in the KSA starting on January 1st, 2018.

What is the deadline for VAT registration?

The deadline for VAT registration depends on your previous year’s turnover.

Annual turnover > 1,000,000 SAR: December 20th, 2017

Annual turnover < 1,000,000 SAR: December 20th, 2018 (taxpayers in this category won’t be able to claim tax returns until they register for VAT)

What are the tax rates under VAT?

There are three VAT rates:

• Standard Rate: 5 %
• Zero Rate: 0%
• Exempt

What is the difference between a zero-rated supply and an exempted supply?

Zero-rated supply: You can claim input VAT that you pay on your purchases.

Exempted supply: You can’t claim input VAT for your purchases, nor can you issue a tax invoice for the sale of exempted goods or services.

How can I verify my VAT Registration Number?

Suppliers and consumers can verify their VAT Registration Number on the ZATCA website.

Who is responsible for the VAT laws in KSA?

VAT is governed by two authorities:

• ZATCA (Zakat, Tax and Customs Authority)
• SAMA (Saudi Arabia Monetary Authority)

Can I charge VAT before January 1st, 2018?

No, charging VAT early is not allowed. Businesses that charge VAT prior to its release on January 1st, 2018 will face fines and suspension of government services.

What if I don’t register for VAT?

Failure to register with VAT before the deadline will result in fines and suspension of government services. You will also face a penalty of 10,000 SAR.

Is Zoho Books approved by the ZATCA?

Yes, Zoho Books is approved by the Zakat, Tax and Customs Authority (ZATCA).

How do I get my business ready for VAT?

A few guidelines to get your business VAT ready:

• Familiarize yourself with the VAT law, its implementations, and key policy positions.
• Have an accounting system in place with a Chart of Accounts for recording your transaction and supply details.
• Ensure you have a mechanism for record keeping, VAT balance assessment, and payments for the purpose of VAT registration and return filing.
• Implement a technical solution to display prices, issue receipts, and record sales of your business.