Current VAT Rates in Saudi Arabia 2025

Standard VAT Rate: 15%

The standard VAT rate of 15% applies to most goods and services supplied within Saudi Arabia. This rate has been in effect since July 1, 2020.

Examples of Standard-Rated Supplies:

• Consumer goods and retail products
• Restaurant and hospitality services
• Professional services (legal, accounting, consulting)
• Construction and contracting services
• Telecommunications services
• Transportation services
• Entertainment and recreational activities
• Most imported goods

Zero-Rated Supplies: 0% VAT

Zero-rated supplies are technically subject to VAT but at a 0% rate. Businesses can still reclaim input VAT on purchases related to zero-rated supplies, making this category advantageous for export-oriented businesses.

Key Zero-Rated Supplies Include:

• Exports of goods and services outside the GCC territory
• International transportation services
• Gold with 99% purity or higher
• Specific food items essential for basic nutrition
• Medical equipment and pharmaceuticals for healthcare
• Educational materials and certain educational services
• Residential real estate sales (first sale of new residential properties)

VAT-Exempt Supplies

Exempt supplies fall completely outside the scope of VAT law. Businesses dealing with exempt supplies cannot charge VAT on sales and cannot reclaim input VAT on related purchases.

Common VAT-Exempt Categories:

• Financial services (banking, insurance, lending)
• Bare land sales

Import VAT

Goods imported into Saudi Arabia are subject to 15% VAT at the point of entry. This applies to most imported goods, with exceptions for zero-rated and exempt categories.

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VAT Registration Requirements

Mandatory Registration Thresholds

Businesses must register for VAT if their taxable supplies exceed:

• SAR 375,000 annually for most businesses
• SAR 187,500 annually for non-resident businesses

Voluntary Registration

Businesses with taxable supplies below the mandatory threshold can voluntarily register if their annual taxable supplies exceed SAR 187,500.

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VAT Compliance and E-Invoicing

ZATCA E-Invoicing Requirements

All VAT-registered businesses in Saudi Arabia must comply with ZATCA's e-invoicing regulations, which include:

• Phase 1: Generation and storage of electronic invoices
• Phase 2: Real-time reporting and clearance with ZATCA systems (implemented in waves based on annual revenue thresholds, with businesses above SAR 7 million required to adopt e-invoicing from January 2025)

VAT Return Filing

VAT-registered businesses must file quarterly VAT returns within 30 days of the end of each tax period. However, businesses with annual taxable supplies exceeding SAR 40 million must file monthly returns. The tax periods are:

• Q1: January-March
• Q2: April-June
• Q3: July-September
• Q4: October-December

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Impact on Different Sectors

Retail and Consumer Goods

The 15% VAT rate significantly impacts retail businesses and consumers, as most consumer goods are subject to the standard rate.

Construction and Real Estate

• Commercial real estate: Subject to 15% VAT
• Residential properties: First sale is zero-rated, subsequent sales and rentals may be exempt

Export-Oriented Businesses

Exporters benefit from zero-rated status, allowing them to reclaim input VAT while not charging VAT on exports.

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VAT Planning Strategies

Input VAT Recovery

Businesses should maintain proper documentation to maximize input VAT recovery on eligible purchases.

Supply Chain Optimization

Companies can structure their supply chains to take advantage of zero-rated and exempt categories where applicable.

Cash Flow Management

The 15% VAT rate requires careful cash flow planning, especially for businesses with long payment cycles.

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Recent Developments and Future Outlook

Tourist VAT Refund Scheme

Effective April 18, 2025, Saudi Arabia launched a VAT refund scheme for tourists as part of its Vision 2030 strategy to boost tourism. Eligible tourists can claim VAT refunds on goods purchased for personal use and taken out of the country, with certain exclusions including food, fuel, vehicles, tobacco products, and some personal items. The minimum refund threshold is SAR 5,000, and refunds are processed by authorized service providers who may charge a commission for their services.

Digital Economy Taxation

Saudi Arabia continues to develop regulations for digital services and e-commerce. New Article 47 introduces clear guidance on when digital platforms or marketplaces are treated as the VAT supplier. If a platform facilitates sales by non-resident or unregistered suppliers, it may become liable for VAT collection, effective January 1, 2026.

GCC Harmonization

As part of the GCC VAT framework, Saudi Arabia coordinates with other Gulf states on VAT policies and cross-border transactions.

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Frequently Asked Questions

What is the current VAT rate in Saudi Arabia?

The current standard VAT rate is 15%, effective since July 1, 2020.

Are salaries subject to VAT?

No, VAT does not apply to salaries, wages, and bonuses as these are not considered supplies of goods or services.

How is VAT calculated on mixed supplies?

For mixed supplies containing both standard-rated and zero-rated/exempt items, VAT is calculated based on the principal supply or proportional allocation.

Can tourists claim VAT refunds?

Yes, effective April 18, 2025, eligible tourists can claim VAT refunds on certain purchases through the Tourist Refund Scheme. The scheme explicitly excludes food, fuel, and some personal items, with a minimum refund threshold of SAR 5,000. Tourists from GCC countries remain eligible until full e-service integration is implemented.

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Conclusion

Understanding Saudi Arabia's VAT system is crucial for businesses operating in the Kingdom. With the standard rate at 15%, proper VAT planning and compliance are essential for financial success. Businesses should stay informed about regulatory changes and ensure full compliance with ZATCA requirements, including e-invoicing and regular VAT return filing.

It is strongly recommended that businesses work with qualified tax professionals and VAT specialists to effectively navigate legal and regulatory complexities, ensure full compliance with requirements, and optimize their tax strategies to maximize the benefits of their VAT positions.

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Disclaimer

This guide provides general information about Saudi Arabia VAT rates and should not be considered as professional tax advice. Businesses should consult with qualified tax advisors for specific situations and compliance requirements.