Saudi Arabia VAT Guide 2026

Overview — VAT in Saudi Arabia

Value Added Tax (VAT) was introduced in Saudi Arabia on 1 January 2018 at 5%, increased to 15% on 1 July 2020. It is a broad-based consumption tax applied to the supply of goods and services at each stage of the supply chain. VAT is administered by ZATCA under the VAT Law and its Implementing Regulations. The tax year aligns with the Gregorian calendar for VAT purposes. Businesses registered for VAT must charge the appropriate rate on taxable supplies and can recover input VAT on business purchases.

Standard Rate — 15%

The standard VAT rate of 15% applies to most goods and services supplied in Saudi Arabia. This includes retail sales, professional services, restaurant meals, electronics, furniture, clothing, and general consumer goods. The rate applies to both goods and services unless specifically zero-rated or exempt. The 15% rate is among the highest in the GCC region, with the UAE at 5% and Bahrain at 10%.

Zero-Rated Supplies

The following supplies are zero-rated (0% VAT) in Saudi Arabia: international transportation of goods and passengers, exports of goods outside the GCC, supply of certain investment-grade precious metals (gold, silver, platinum) qualifying for investment purposes, and supplies to diplomatic missions and international organizations subject to certain conditions. Zero-rated supplies allow the supplier to recover input VAT while charging no output VAT.

Exempt Supplies

Certain supplies are exempt from VAT, meaning no VAT is charged and input VAT recovery is restricted. Exempt supplies include: financial services (banking, insurance, lending), residential real estate leases (certain conditions apply), and life insurance products. Businesses making exempt supplies cannot recover input VAT attributable to those supplies.

VAT Registration Thresholds

Businesses with taxable supplies exceeding SAR 375,000 in a 12-month period must register for VAT (mandatory threshold). Businesses with supplies between SAR 187,500 and SAR 375,000 may register voluntarily. Non-resident businesses making taxable supplies in Saudi Arabia must register regardless of value. There is no threshold for non-residents. Registration is done through ZATCA's online portal.

VAT Returns and Filing

VAT returns are filed quarterly for most businesses. Large taxpayers (annual supplies exceeding SAR 40 million) must file monthly. Returns must be submitted within 30 days of the end of the tax period. Payment of any VAT due must accompany the return. Late filing penalties include a 5% penalty on the unpaid VAT in the first month, increasing by 2% per month thereafter, capped at 25% of the unpaid amount. Late payment penalties are also applied.

Reverse Charge Mechanism

The reverse charge mechanism applies to cross-border supplies of services and certain goods where the recipient is a registered VAT person in Saudi Arabia. Under reverse charge, the recipient accounts for the VAT on behalf of the non-resident supplier, effectively shifting the compliance obligation to the local recipient. This ensures that VAT is collected on services imported into the kingdom.

FAQs

When did Saudi Arabia increase VAT to 15%?

The increase from 5% to 15% took effect on 1 July 2020, as part of the government's revenue diversification strategy during the COVID-19 pandemic.

Can visitors to Saudi Arabia claim VAT refunds?

Yes, a VAT refund scheme for visitors (tourists) exists, administered through Tax Free Saudi Arabia. Visitors can claim refunds on purchases made from participating retailers when leaving the country, subject to minimum purchase amounts and processing fees.

Are there penalties for late VAT registration?

Yes. Penalties for late VAT registration range from SAR 1,000 to SAR 10,000, with additional penalties for failure to file returns or pay VAT on time.

Disclaimer

This guide provides general information about Saudi Arabia's VAT regime for the 2026 tax year. Tax laws and rates may change. Always consult with a qualified Saudi tax advisor or ZATCA directly for advice specific to your situation. InvestmentKit does not provide tax advice.