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VAT Registration in Saudi Arabia

VAT Registration in Saudi Arabia

The Value Added Tax (VAT) in Saudi Arabia represents an indirect tax that is levied on all goods and services acquired and sold by a legal entity, with several exceptions. Since the 1st of January, 2018, Saudi Arabia has imposed this tax here. 

In this article, our company formation consultants in Saudi Arabia give a brief overview of the VAT in this country. We are at your disposal if you are interested in VAT registration in Saudi Arabia.

VAT registration in Saudi Arabia for foreign companies

Foreign companies making taxable supplies must complete the procedure for VAT registration in KSA (Kingdom of Saudi Arabia) as soon as they have made VAT-taxable income.

A foreign enterprise must apply for a VAT number in Saudi Arabia regardless of the registration threshold. Moreover, it will be required to appoint a tax representative based in Saudi Arabia. The representative must be approved by the Zakat, Tax and Customs Authority (GAZT).

Obtaining a VAT certificate in Saudi Arabia is not complicated, however, we recommend you use specialized services for a quicker procedure.

Here is the information to be filed for Saudi VAT registration as a foreign company:

  • name of the company and identification details;
  • business address and email contact information;
  • Commercial identification information (Certificate of Registration) ;
  • VAT registration date in the home country;
  • value of annual taxable supply.

You can rely on our local specialists for guidance in VAT registration in Saudi Arabia in this country. We are also at your disposal if you want to open a branch office or subsidiary, the two most employed legal forms of doing business in Saudi Arabia as a foreign enterprise.

We also provide assistance in VAT matters. We are able to manage all aspects of the VAT-related financial process, including computation, filing, and payment of the due amounts. You can rely on our Saudi accountants to help you with specialized accounting services based on the size of your company.

VAT registration in KSA for local companies

All enterprises that have a place of business/legal address in the Kingdom and have taxable supply worth more than SAR 375,000 (approx. 99,000 USD) in the previous calendar year are required to apply for VAT numbers in Saudi Arabia. Additionally, companies that predict that the yearly worth of supplies they will make in the following 12 months will exceed the threshold of SAR 375,000 must also register for this tax.

For local companies, there is also the option of voluntary VAT registration in Saudi Arabia. However, only certain categories of enterprises in the Kingdom can elect to register voluntarily. All enterprises that have a location in the KSA and whose taxable supply value exceeded SAR 187,500 but not SAR 375,000 in the previous 12 months or are expected to exceed in the following 12 months are eligible to register for VAT.

A company may voluntarily apply for a VAT certificate in Saudi Arabia if its annual expenditures or purchases surpass the aforementioned criteria in addition to on the basis of the supplies it produces (outward supplies).

Should you decide to register for VAT in KSA and need support, feel free to ask for our accounting services. We are also at your disposal with company formation services in Saudi Arabia.

Steps to obtain a VAT number in Saudi Arabia as a local or foreign company

The procedure of obtaining a VAT certificate in Saudi Arabia implies completing the following 5 steps:

  1. obtaining a Tax Identification Number Account (TIN);
  2. accessing the GAZT portal;
  3. applying for VAT registration;
  4. submitting the information and paperwork necessary to complete the VAT registration;
  5. filing a declaration on the VAT-taxable income generated or to be obtained for voluntary registration purposes.

Feel free to address our agents if you need a representative for VAT registration in Saudi Arabia.

VAT applicability in Saudi Arabia in 2024

The value added tax in Saudi Arabia in 2024 is a consumption tax applied to all goods and services provided in the city-state. It also applies to imported goods. The VAT is considered an indirect tax because it is paid by the final consumer and it is not levied on the company that produces or distributes the product or supplies the service. 

At the level of 2024, foreign company owners seeking VAT registration in Saudi Arabia can rely on our accountants.

Details on the VAT in Saudi Arabia

As mentioned earlier by our company registration advisors in Saudi Arabia, there are certain goods and services which pay a 0% VAT rate in this country in 2024. These are:

  • Exports of products and services outside the Council Territory, when backed by proof of the movement of these products or services;
  • Supplies with customs duty suspension areas;
  • Exports of services when the client is not a resident of the Council Territory and/or the consumption does not occur within the Territory;
  • International transport services of goods and individuals;
  • Medical equipment and medicines;
  • Investments in precious metals.

Also, there are certain supplies that are exempt from VAT in Saudi Arabia in 2024 and, therefore do not have the right to reclaim of the input VAT reclaims. These are:

  • The issuance or transfer of money or security on a monthly basis;
  • Credit;
  • Operations of current, deposit and savings accounts;
  • Financial instruments;
  • Islamic finance products, which are Shari’ah compliant;
  • Interests on loans, debt security or credit;
  • Life insurance;
  • Other services: our Saudi Arabia company formation agents can provide more details on what these other services consist of.

We can also advise you on how to open a company in Saudi Arabia.

We can also assist in immigration to Saudi Arabia through employment. In this case, one needs a local employer to get a work permit. The application must be submitted by the sponsoring company, and the employee must provide the necessary paperwork. Contact us for details on how to relocate here through such a visa.

The residence permit for Saudi Arabia can be used for several actions, once you move here. For example, you can use it to open a bank account, apply for a driver’s license, purchase a SIM card, and many other things. So, if you decide to move here and need support in obtaining the Iqama, please contact us.

Changes in VAT rates in Saudi Arabia

The value added tax was introduced in 2018 at the rate of 5%, however, in 2020, the tax authorities made certain amendments to this tax, as follows:

  • the standard rate has increased from 5% to 15% for most goods and products liable for VAT;
  • a 0% rate also applies to exported goods, medical equipment, precious metals, etc.

Should you need advice on choosing a VAT representative that is approved by GAZT, you can address our specialists for guidance and support.

We are also at your disposal with certain legal services in Saudi Arabia.

VAT regulations in Saudi Arabia in 2024

A member of the Shoura Council, Mr. Mohammed Al-Khunaizi, recently declared that the introduction of the VAT in Saudi Arabia would help to raise the tax revenues for the local authorities to use for infrastructure and development.

Mr. Al-Khunaizi continued by saying that there would be punitive measures taken strictly for those who had not registered so far or who do not abide by the laws. Our team can help you comply with the accounting and reporting requirements.

E-invoicing requirements for Saudi companies

Introduced during the pandemic, the e-invoicing system has now reached the second phase, during which taxpayers must enroll in the system.

Eight waves of taxpayers have been confirmed by the Saudi tax authorities (ZATCA) to participate in the required e-invoicing Integration Phase 2. These individuals are taxpayers whose yearly income in 2021 or 2022 falls between SAR 30 million and SAR 40 million. Beginning in the middle of 2024, they will have to abide by the national FATOORAH rule.

Thus far, the confirmed waves consist of:

  • taxpayers with yearly incomes between SAR 30 million and SAR 40 million will be in the ninth wave by June 2024;
  • taxpayers with yearly incomes between SAR 40 million and SAR 50 million;
  • taxpayers with yearly incomes between SAR 50 million and SAR 70 million;
  • taxpayers with yearly incomes between SAR 70 million and SAR 100 million;
  • taxpayers with yearly incomes between SAR 100 million and SAR 150 million;
  • taxpayers with yearly incomes between SAR 150 million and SAR 250 million;
  • taxpayers with yearly incomes between SAR 250 million and SAR 500 million;
  • taxpayers with annual turnover above SAR 3 billion;
  • companies with a turnover above SAR 500 million (about USD 13.3 million).

The excise tax in Saudi Arabia

Only tobacco products (at 100%), soft drinks (at 50%), and energy drinks (at 100%) were chosen as the goods subject to the excise tax in Saudi Arabia when the excise tax law went into force on June 11, 2017.

Manufacturers and importers of items subject to the Saudi Arabian excise tax need to register with the tax authorities in order to comply with the law. Companies that meet the requirements to fall under the purview of the Excise Tax Law but fail to register and follow the instructions provided by the tax department will be regarded as tax evaders and subject to fines.

If you have further questions about the Saudi Arabian VAT rates for 2024, or for assistance in setting up a company in Saudi Arabia, please get in touch with our friendly staff.