Trading bloc membership Gulf Cooperation Council (GCC)
Greater Arab Free Trade Area (GAFTA)
Administered by Zakat, Tax and Customs Authority (ZATCA –https://zatca.gov.sa/en)
VAT rates
Standard 15%
Other Zero-rated (0%) and exempt
VAT number format Numeric account number composed of 15 digits (E, 012345678912345)
VAT return periods Quarterly (general rule)
Monthly (if annual taxable supplies exceed SAR40 million)
Thresholds
Registration SAR375,000
Recovery of VAT by non-established businesses Yes, subject to certain conditions
B. Scope of the tax
VAT applies to the following transactions:
• The supply of goods and services made in Saudi Arabia by a taxable person
• The acquisition of goods or services received in Saudi Arabia by a taxable person
• Reverse-charge services received by a taxable person in Saudi Arabia
• Taxable imports of goods received by a taxable person in Saudi Arabia
In some cases, supplies may be outside the scope of VAT, e.g., when supplies are:
• Made by a nontaxable person
• Made outside Saudi Arabia (but note special place-of-supply rules for certain international services, e.g., electronically supplied services)
• Not made in the course of an economic activity
In other cases, supplies not usually in the scope of VAT are deemed to be taxable supplies such as supplies for nil consideration, subject to certain exclusions.
Real estate transaction tax. Real estate transaction tax (RETT) is levied in lieu of VAT on real estate supplies made in Saudi Arabia. RETT is effective in Saudi Arabia from 4 October 2020 and is charged at 5% based on the total value of the real estate disposed, regardless of its condition, shape or use at the time of disposal.
RETT shall be levied based on the agreed value between the contracting parties, provided that the agreed value is not less than the fair market value of the real estate on the date of disposal. RETT applies regardless of whether the recipient is a resident in Saudi Arabia or not. The seller shall be obligated to discharge the tax liability to ZATCA. However, both seller and buyer shall be jointly responsible for any tax obligations.
The RETT Implementing Regulations provides the following key exemptions in whole or in part (but not limited to):
1. Disposal of the real estate in the case of division or distribution of the inheritance.
2. Disposal of the real estate for free for a “family,” charitable or licensed charity endowment.
3. Disposal of the real estate for a governmental entity or for public legal persons or entities and projects of public interest, and for the purposes of this paragraph, public interest shall mean entities and institutions that carry this status under the Civil Associations and Institutions Law.
4. Disposal of the real estate by a governmental entity as a public authority outside the framework of economic, investment or commercial activity.
Imports into Saudi Arabia by a taxable person or nontaxable person are subject to VAT, with the actual payment of VAT required to be made to customs at the point of import. Authorization may be granted to registered taxable persons to make the payment of VAT through its tax return as opposed to at customs. Despite there being a customs union in the GCC, in cases where a resident nontaxable person in Saudi Arabia imports goods with a value exceeding SAR10,000 into Saudi Arabia from another GCC Member State, and cannot prove at the time of such entry that VAT was paid on the purchase of those goods in such GCC Member State, that person is deemed to make an import of those goods and VAT shall be payable on such imports.
Goods or services that a taxable business supplies to itself are not taxable (with the exception of nominal supplies, i.e., deemed supplies). This includes instances where one member of a VAT group provides services to another member of that group.
Exemption from registration. A taxable person who at any time has annual supplies made in Saudi Arabia that exceed the mandatory registration threshold, but which are exclusively zero-rated supplies, is excluded from the requirement to register. They may, however, elect to register voluntarily. Exempt supplies do not count toward voluntary or mandatory registration thresholds.
Voluntary registration and small businesses. A person who has a place of residence in Saudi Arabia who is not obligated to register for VAT (as per the rules outlined above), may apply for VAT registration if its total value of taxable supplies in the past 12 months or expected taxable sales in the next 12 months are between SAR187,500 and SAR375,000. A person can also register voluntarily if their expenses in the past, or next 12 months, equal or exceed SAR187,500.
Group registration. Two or more legal persons may apply for VAT registration as a VAT group if all the following conditions are met:
• Each group member must perform an economic activity and be a legal resident in Saudi Arabia.
• 50% or more of the capital of each legal person, or ownership or control of 50%, or more of the voting rights or value, in both or all the group members, is held by the same person or group of persons, whether directly or indirectly (i.e., under common control).
• At least one of the group members must independently meet the taxable sales threshold for VAT registration.
All members of a VAT group in Saudi Arabia are jointly and severally liable for VAT debts and penalties.
An application to form a VAT group must be made by a taxable person. This person will be the representative member of the VAT group and will have the primary obligation to comply with the obligations and the rights of the group on behalf of all members of the group, without prejudice to the joint liability of the other members of the group.
The VAT group registration takes effect from the first day of the month following the month in which the application is approved or such later date as determined by the tax authority. If the application is approved, the tax authority will issue a new VAT identification number to the VAT group representative on behalf of the VAT group and suspend the existing VAT identification numbers of members who are individually registered for VAT.
The tax authority may issue a notice to two or more taxable persons who are not part of any VAT group, but who are eligible to form one together, that they are considered to be in a VAT group from any prospective date. Such notice may only be issued where the VAT registration of each taxable person results or will result in the accrual of a VAT advantage. There is no minimum time period required for the duration of a VAT group. Changes to the VAT group (e.g., addition or deletion of members) may be done as and when necessary.
Fixed establishment. A foreign business is deemed to have a fixed establishment for VAT purposes in Saudi Arabia, as any fixed location for a business, other than the place of business, in which
business does not have a TIN, it is required to register for one on the ZATCA’s website prior to VAT registration. To register, the eligible person must provide the following, at the minimum:
• Taxable person details (e.g., legal name, address, contact number)
• Financial details – projected and actual taxable sales for the next and last year, respectively; and projected and actual taxable expenses for the next and last year, respectively
A VAT registration application can be submitted through the tax authority portal or through electronic mail.
The tax authority has developed an online portal, which is available on its website, where taxable persons can verify suppliers and customers’ VAT registration numbers.
Deregistration. If a taxable person ceases to carry on an economic activity, including cases where a legal person ceases to exist as a legal person, that taxable person shall deregister. Deregistration will take effect from a date determined by the Saudi Arabia tax authority after its approval of the deregistration.
Where at the end of any month, a nonresident taxable person has not made any taxable supplies in Saudi Arabia in the most recent 12-month period, the taxable person must deregister.
At the end of any month, a resident taxable person (having been registered for at least 12 months) is required to deregister where all the following occur:
• The total value of annual supplies or annual expenses in the last 12 months is less than the voluntary registration threshold.
• The total value of annual supplies made in Saudi Arabia or annual expenses in the last 24 months does not exceed the mandatory registration threshold.
• The total value of annual supplies or annual expenses in that month and the subsequent 11 months is not anticipated to exceed the voluntary registration threshold.
A taxable person shall apply for deregistration to the Saudi Arabia tax authority within 30 days of any of the cases above. If the taxable person does not apply for deregistration to the tax authority, the tax authority may deregister that person. In such a case, the tax authority will issue a notification.
Deregistration is optional if:
• A business’s taxable supplies in the last 12 months are between SAR187,500 and SAR375,000
• A business’s expected taxable supplies in the next 12 months (current month included) are between SAR187,500 and SAR375,000
The deregistration takes effect on the date determined by the tax authority after its approval of the deregistration. A taxable person may not apply to deregister voluntarily in cases where it has been registered for less than 12 months. The tax authority may refuse an application for deregistration where it does not have sufficient evidence that a taxable person is eligible to deregister.
Changes to VAT registration details. Where any of the taxable person’s information changes from that provided in the application or otherwise currently recorded, that person is required to notify the tax authority of the change within 20 days of that change taking place. The mode of notification is not specified, but it is presumed to be electronically through the online portal.
D. Rates
The term “taxable supplies” refers to supplies of goods and services that are liable to a rate of VAT, including the zero-rate.
The VAT rates are:
• Standard rate: 15%
• Zero-rate: 0%
The standard rate of VAT applies to all supplies of goods or services unless a specific measure provides for a reduced rate, the zero-rate or an exemption.
The standard rate of VAT at 15% increased from 5% to 15% with effect from 1 July 2020. As a transitional measure, the previous rate of 5% could have been applied for goods or services supplied on or after 1 July 2020 in any of the following cases:
• If the supply is under a contract or agreement entered prior to 11 May 2020 and the recipient of the supply under such contract can recover the VAT in full or is a government entity – until the contract renewal, expiry or 30 June 2021, whichever is earlier
• If a tax invoice was already issued prior to 11 May 2020 for supplies to be made on or after 1 July 2020 – to the extent of the supplies covered in the invoice and performed or completed on or before 30 June 2021
The following imports of goods, which are not subject to customs duties, are exempt from import VAT:
• Goods for diplomatic and military use that are exempt from customs duties
• Imports of personal effects and household appliances being moved into Saudi Arabia that are exempt from customs duties in accordance with the Unified Customs Law
• Imports of returned goods that are fully exempt from customs duties
• Low value imports of personal items and gifts carried in travelers’ personal luggage, within the limits set by the Customs Department for relief from customs duties collection
Examples of goods and services taxable at 0%
Saudi Arabia will treat intra-GCC products in the same way as non-GCC imports for the purposes of VAT, until the full integration of the Electronic Services System. This means that the concept of the implementing states is currently not live and that supplies to GCC residents are treated in the same way as supplies to non-GCC residents.
• A direct export from Saudi Arabia to a place outside of the GCC territory
• Services provided to non-GCC residents.
• Within international transport, zero-rated goods and services include: – International transport of passengers and goods – Vehicles and equipment to be used for international transportation – Certain goods and services provided in connection with international transportation
• Medicines and medical goods considered as qualifying medicines and qualifying medical goods as per the classification issued by the Ministry of Health or any other competent authority from time to time; qualifying medicines and medical goods will be part of the Ministry of Health’s formulary drug list
• Investment metals: two types of transactions involving qualifying investment metals (gold, silver and platinum of 99% purity or higher) are zero-rated:
– A producer or refiner’s original sale of investment metal
– Any further sale of gold, silver and platinum where the purity level remains
• Supply of military supplies to designated military forces in Saudi Arabia, given that the supply is made by a designated taxpayer who is licensed by the General Authority of Military Industries (GAMI)
The term “exempt supplies” refers to supplies of goods and services that are not liable to VAT and that do not qualify for input tax deduction.
Examples of exempt supplies of goods and services
• Certain financial and insurance services: this does not include instances where consideration payable is by way of explicit fees.
• Real estate: due to the introduction of the real estate transaction tax (RETT) from 4 October 2020 onward (see the Real estate transaction tax subsection above, under Section B. Scope of the tax for further details), certain transactions such as the supply by way of sale, lease, license
or rental of a real estate property (except for the lease of commercial property) are now exempt from VAT. The supply of hotel accommodation, non-hotel but serviced accommodation or residential property held out for rent in a similar manner to hotel or serviced accommodation will not qualify for exemption. Any lease of commercial property or property designated or used for commercial purposes will also not qualify for exemption.
Option to tax for exempt supplies. The option to tax exempt supplies is not available in Saudi Arabia.
E. Time of supply
The general time of supply rules for goods and services is the earlier of:
• Date of issuing a tax invoice
• When the goods or services are supplied
• When any payment is received to the extent of the payment
Deposits and prepayments. A deposit for a supply designed to be paid by the customer as an advance payment that will be considered as an initial payment for the supply or subsequent payments will create a tax point when received.
The tax point for an advance payment is whichever of the following happens first:
• The date the VAT invoice is issued for the advance payment
• The date the advance payment is received
VAT is due on the advance payment in the VAT return for the period when the tax point occurs.
A security deposit is not treated as a consideration for a supply unless the deposit is applied, either in part or full, as consideration for a supply, or it is forfeited in relation to defaulting the performance of the obligation. Apart from security deposits, a prepayment or deposit intended by the payer and recipient to eventually form part of the consideration for an identifiable supply creates a tax point when received.
Continuous supplies of services. In cases where goods or services are supplied and the invoice or agreement between the supplier and customer states that consideration is due and payable in periodical installments, a separate supply in respect of each installment takes place on the earlier of the due date for the payment of that installment or the date of actual payment.
In all other cases where supplies of goods or services are made on a continuing basis, a separate supply takes place on the earlier of the date an invoice is issued, or payment is made in respect of those goods or services, to the extent of the amount invoiced or paid.
If no payment has been received or no invoice has been issued in relation to a continuous supply of goods or services by a taxable person, the supply is deemed to take place on the date falling 12 months after the later of:
• The date on which the supply of goods or services commences
• The previous date on which the supply took place by reason of an invoice being issued or payment being made
Goods sent on approval for sale or return. There are no special time of supply rules in Saudi Arabia for supplies of goods sent on approval for sale or return. As such, the general time of supply rules apply (as outlined above).
Reverse-charge services. There are no special time of supply rules in Saudi Arabia for supplies of reverse-charge services. As such, the general time of supply rules apply (as outlined above).
Leased assets. There are no special time of supply rules in Saudi Arabia for supplies of leased assets. As such, the general time of supply rules apply (as outlined above).
Pre-registration costs. A taxable person is entitled to deduct input tax incurred by it in respect of services supplied to it during the period of six months before the effective date of registration, provided that:
• The services are purchases to be used for supplies outlined above
• The services have not been supplied onward or used in full by the taxable person prior to the registration date
• The services are not of a type that is restricted from deduction
A taxable person is entitled to deduct input tax incurred by it in respect of goods supplied to it or goods imported by it before the effective date of registration, provided that:
• The goods are purchased or imported to be used for supplies outlined in the Recovery of VAT by taxable persons subsection, and where VAT cannot be wholly attributed to such, an apportionment is used
• In cases where the goods are capital assets, these have a positive book value at the date of registration
• The goods have not been supplied onward by the taxable person or used in full by the taxable person prior to the registration date
• The goods are not of a type that is restricted from deduction
Bad debts. In cases where a taxable person does not receive all or part of the consideration for a taxable supply made by them, the taxable person may reduce their output tax for the VAT amount calculated on the consideration not paid in the VAT return in which all the following conditions are met:
• The taxable person has previously included VAT calculated on the taxable supply as output tax on a VAT return and made payment of the VAT due
• The consideration is in respect of a supply of goods or services made to a customer who is not a related person
• A period of at least 12 months has passed from the date of the taxable supply
• The taxable person holds a certificate from their certified accountant indicating that the unpaid consideration has been written off in their books
• In cases where the total amounts unpaid by a customer exceeds SAR100,000, formal legal procedures have been taken to collect the debts without success and the taxable person can provide evidence of these procedures, such as the issuance of a judicial ruling, evidence of the debtor’s bankruptcy or a court order indicating any other formal recovery procedure
A taxable person using the cash accounting basis cannot make any adjustment for nonpayment, as outlined above.
Noneconomic activities. Input tax may not be recovered on purchases of goods and services that are not used in the course of carrying on the taxable person’s economic activity.
The tax authority may allow designated persons not carrying on an economic activity, or those engaged in designated economic activity, to apply for a refund of VAT paid by them on supplies of goods or services received in Saudi Arabia. The Minister of Finance may issue an order setting out a list of persons considered an eligible person. Foreign governments, international organizations, diplomatic and consular bodies, and missions may also be authorized by the Minister of Finance as an eligible person to request a refund of VAT incurred on goods and services in Saudi Arabia.
G. Recovery of VAT by non-established businesses
Refund mechanism. The tax authority has launched an e-services portal for the submission of VAT refund applications for nonresident businesses that have incurred VAT in Saudi Arabia but are not registered as a taxable person in Saudi Arabia, and therefore were not able to recover VAT in the past. The process of submitting VAT refund applications consists of three main steps:
• Creating an account on the ZATCA e-services portal (one-time process)
The integration phase is being implemented in waves and based on the announcement on the ZATCA portal, resident businesses should comply with the e-invoicing Phase 2 requirements as follows:
• Wave 1: VAT-registered taxable persons whose taxable turnover is more than SAR3 billion in 2021 must integrate with the ZATCA’s Fatoora portal from 1 January 2023 to 30 June 2023.
• Wave 2: VAT-registered taxable persons whose taxable turnover is more than SAR500 million up to SAR3 billion in 2021 or 2022 must integrate with the ZATCA’s Fatoora portal from 1 July 2023 to 30 December 2023.
• Wave 3: VAT-registered taxable persons whose taxable turnover is more than SAR250 million up to SAR500 million in 2021 or 2022 must integrate with the ZATCA’s Fatoora portal from 1 October 2023 to 31 January 2024.
• Wave 4: VAT-registered taxable persons whose taxable turnover is more than SAR150 million up to SAR250 million in 2021 or 2022 must integrate with the ZATCA’s Fatoora portal from 1 November 2023 to 29 February 2024.
• Wave 5: VAT-registered taxable persons whose taxable turnover is more than SAR100 million up to SAR150 million in 2021 or 2022 must integrate with the ZATCA’s Fatoora portal from 1 December 2023 to 31 March 2024.
• Wave 6: VAT-registered taxable persons whose taxable turnover is more than SAR70 million up to SAR100 million in 2021 or 2022 must integrate with the ZATCA’s Fatoora portal from 1 January 2024 to 30 April 2024.
• Wave 7: VAT-registered taxable persons whose taxable turnover is more than SAR50 million up to SAR70 million in 2021 or 2022 must integrate with the ZATCA’s Fatoora portal from 1 February 2024 to 31 May 2024.
• Wave 8: VAT-registered taxable persons whose taxable turnover is more than SAR40 million up to SAR50 million in 2021 or 2022 must integrate with the ZATCA’s Fatoora portal from 1 March 2024 to 30 June 2024.
• Wave 9: VAT-registered taxable persons whose taxable turnover is more than SAR30 million up to SAR40 million in 2021 or 2022 must integrate with the ZATCA’s Fatoora portal from 1 June 2024 to 30 September 2024.
• Wave 10: VAT-registered taxable persons whose taxable turnover is more than SAR25 million up to SAR30 million in 2022 or 2023 must integrate with the ZATCA’s Fatoora portal from 1 October 2024 to 31 December 2024.
• Wave 11: VAT-registered taxable persons whose taxable turnover is more than SAR15 million up to SAR25 million in 2022 or 2023 must integrate with the ZATCA’s Fatoora portal from 1 November 2023 to 31 January 2025.
• Wave 12: VAT-registered taxable persons whose taxable turnover is more than SAR10 million up to SAR15 million in 2022 or 2023 must integrate with the ZATCA’s Fatoora portal from 1 December 2024 to 28 February 2025.
• Wave 13: VAT-registered taxable persons whose taxable turnover is more than SAR7 million up to SAR10 million in 2022 or 2023 must integrate with the ZATCA’s Fatoora portal from 1 January 2025 to 31 March 2025.
• Wave 14: VAT-registered taxable persons whose taxable turnover is more than SAR5 million up to SAR7 million in 2022 or 2023 must integrate with the ZATCA’s Fatoora portal from 1 February 2025 to 30 April 2025.
• Wave 15: VAT-registered taxable persons whose taxable turnover is more than SAR4 million up to SAR5 million in 2022 or 2023 must integrate with the ZATCA’s Fatoora portal from 1 March 2025 to 31 May 2025.
• Wave 16: VAT-registered taxable persons whose taxable turnover is more than SAR3 million up to SAR5 million in 2022 or 2023 must integrate with the ZATCA’s Fatoora portal from 1 April 2025 to 30 June 2025.
last day of the month following the end of the tax period to which the VAT return relates. This deadline applies whether such date is a working day or a nonworking day. A VAT return filed validly on behalf of a taxable person shall be considered that taxable person’s self-assessment of VAT due for that tax period.
For taxable persons whose annual value of taxable supplies exceeds SAR40 million during the previous 12 months or is expected to exceed in the following 12 months, the tax period shall be monthly. For all other taxable persons, the standard tax period shall be three months. If a taxable person’s annual value of taxable supplies does not exceed this value, they may submit an application to use a monthly tax period.
A taxable person who has used the monthly tax period for two years may submit an application to use a tax period of 3 months, provided that taxable person’s value of annual taxable supplies during the last 12 months does not exceed the SAR40 million value.
The tax authority may with a reasoned decision, obligate a taxable person to change their tax period.
Periodic payments. Payment of VAT due by a taxable person in respect of a tax period must be made at the latest by the last day of the month following the end of that tax period. The person making the payment must provide details of the tax identification number of the taxable person and the tax period or tax periods to which the period relates.
Businesses must pay the tax authority the VAT they owe via a bank transfer to the tax authority’s designated account using the SADAD payment system.
The net VAT payable by a taxable person in respect of a tax period is calculated by deducting the total input tax (including input tax on imports) allowed to the taxable person during the tax period from the total amount of output tax payable in respect of all taxable supplies made by the taxable person in Saudi Arabia during the tax period. This calculation method is known as the invoice accounting basis.
When the tax authority receives a payment from a taxable person, it will first be applied to the balance of the tax period to which the payment refers. Any excess balance will be applied to penalties, fines or charges owing from any previous tax period, and the remainder will then be applied to outstanding balances for other tax periods, starting from the oldest period with a balance payable.
The tax authority may offset any VAT credit balance against any other taxes due by the taxable person. The tax authority shall notify the taxable person where an offset of a credit balance is carried out.
If a VAT return is in a refund position, the balance can be carried forward and set off against a future payment or a refund can be requested. For VAT returns in a net refund, this option is to be selected at the time of submitting the VAT return.
Where any relevant VAT amount is expressed in a currency other than SAR, the amount must be converted to SAR using the daily rate prescribed by the Saudi Arabian Monetary Authority on the date that the relevant VAT amount becomes due.
Electronic filing. Electronic filing is mandatory in Saudi Arabia for all taxable persons. Taxable persons have to login to the ZATCA portal (https://zatca.gov.sa/en) and submit the VAT return electronically. Supporting documents can be uploaded and amendments can be filed through the portal. The option for paper filing is not available in Saudi Arabia.
Payments on account. Payments on account are not required in Saudi Arabia.
Special schemes. Secondhand goods. A taxable person may apply to account for VAT payable on a supply of eligible used goods, using the profit margin method. The taxable person may not use this method until it has received notification from ZATCA that it is approved. A supply of eligible used goods must meet all of the following criteria:
• The supply is used goods situated in Saudi Arabia, and the goods are of a type that ZATCA has specified are eligible for VAT to be calculated using the profit margin method.
• The goods were purchases by the taxable person in a supply made to the taxable person in Saudi Arabia by a nontaxable person, by a taxable person outside of their economic activity, or by a supplier applying the profit margin method in all cases where such a taxable person did not deduct any input tax on their purchase of the goods.
• The taxable person meets the criteria in respect of the purchase and supply of such eligible used goods.
A supply of goods that are situated outside of Saudi Arabia, or that move to or from Saudi Arabia as part of the supply to, or supply by, the taxable person is not a supply of eligible used goods.
VAT invoices issued for supplies of eligible used goods by a taxable person must clearly refer to the taxable person’s use of the profit margin method and must not show any amount of VAT charged in respect of any supply.
In cases where a taxable person purchases the eligible used goods from a nontaxable person, the taxable person must issue an invoice in respect of the purchase to that nontaxable person. This invoice must include:
• The name, address and tax identification number of the taxable person
• The name and address of the nontaxable person
• The date of the purchase
• Details of the goods purchases, including any relevant registration number or other details that ZATCA may specify
• The consideration payable in respect of the purchase of the goods
The profit on a supply of eligible used goods is calculated as the consideration for the supply of the eligible used goods by the taxable person, less the consideration payable in respect of the purchase of the eligible used goods. The profit does not include any expenses or other amounts incurred by the taxable person in respect of the supply. In cases where the profit calculated of any supply is zero, or results in a negative amount, the value of that supply by the taxable person is zero.
A taxable person must not deduct input tax of any VAT amount charged to it or included in the consideration for the purchase of eligible used goods.
On 19 May 2023, the tax authority announced the effective date for using the profit margin method in relation to the supply of eligible used goods (used cars) to be from 1 July 2023 onward. In this regard, the tax authority outlined the following:
• Conditions for applying the profit margin method:
– The car must be classified as a “qualifying used vehicle” by the authority
– The used car must be registered in Saudi Arabia
– The person must be licensed to undertake the activity of car trading
– The person obtains the approval of the tax authority to use a profit margin method on used cars
– The taxable person has not incurred input tax according to the usual method in respect of the consideration paid when purchasing an eligible used car
– The taxable person must not have deducted any input tax imposed or included in the consideration paid when purchasing an eligible used car
Subject to the above, if understatement of net VAT by the taxable person is less than SAR15,000, the taxable person may correct that error by adjusting the net VAT in its next VAT return.
No correction to any VAT return relating to an overstatement of VAT in respect of a tax period may be made after a period of five years has passed from the end of the calendar year in which the tax period takes place.
A non-registered taxable person shall be liable to a fine not exceeding SAR100,000 for issuing a VAT invoice without prejudice to any stricter penalty set out by any other law.
A fine not exceeding SAR50,000 shall be imposed on any taxable person that:
• Has not kept VAT invoices, books, records and accounting documents for the set time frame, and the fine shall be per tax period
• Prevents or obstructs the employees of the Saudi Arabia tax authority or anyone working for the tax authority from performing their duties
• Violates any other provision of the law or implementing regulations
If the same violation is repeated within three years from the date of issuing the final decision of a previous penalty, the fine, pursuant to that decision imposed on the violator, may be doubled.
The decision issued by the Saudi Arabia tax authority to impose a penalty, may include the publication of its content at the cost of the violator, in a local newspaper issued in the place of the taxable person’s residence. If there is no newspaper in their place of residence, it shall be published in a local newspaper in the nearest area to them or by any other appropriate means, depending on the type of violation, its gravity and its effects, after the decision is deemed final.
There are no specific penalties associated with the late notification or failure to notify changes to a taxable person’s VAT registration details. For further details, see the subsection Changes to VAT registration details above.
Penalties for fraud. Tax evasion shall be punishable by a fine of not less than the amount of VAT due and not more than three times the value of the goods or services that are the subject of the evasion. For example, this could be where a taxable person submits false documents to evade the payment of the VAT due or to reduce its value, or where a taxable person moves goods in or out of Saudi Arabia without paying the VAT due.
Where a supplier charges and collects VAT from customers, without the supplier being VAT registered, they shall be fined up to SAR100,000.
Penalties for general VAT and e-invoicing violations. . Below is a summary of penalties to be imposed for each type of general violation. For these violations, the taxpayer is notified and given a timeframe within which to rectify the violation.
of the taxable person to issue tax invoices in accordance with the provisions of the law and regulations.
Failure of the taxable person to issue a credit or debit note or provide it to the customer in accordance with the provisions of the law and regulations.
Failure of the taxable person to include the required information in the tax invoices or the related credit and debit notes. A fine is imposed according to each field of the invoice or notice that is missing or incorrect.
Failure to retain invoices, records, and accounting documents in accordance with the provisions and regulations stipulated in the law. A separate fine is applied for each rule that is violated.
Preventing or obstructing the authority’s employees from performing their duties and responsibilities.
Incorrect calculation of the due tax on invoices issued to the final consumer.
Violation of any provision of the law or regulations.
Failure of the taxable person to retain electronic invoices and notices in the format and storage method specified in the e-invoicing regulations and for the periods specified therein, starting from the effective date of the e-invoicing regulations.
Failure to notify the authority via the means specified by it of any incidents, technical failures, or emergencies that hinder the issuance of electronic invoices or notices in accordance with the timeframes specified by the authority, starting from the effective date of the e-invoicing regulations.
Failure to include a QR code in the electronic invoice or electronic notice starting from the effective date of the e-invoicing regulations.
Failure to include all required fields, details, and other mandatory information in electronic invoices or notices shared with the authority starting from the actual date set for the obligation to link with the authority’s systems.
Failure to share electronic invoices or notices with customers in the required format, starting from the actual date set for the obligation to link with the authority’s systems.
Violation of any provision of the e-invoicing regulations or related executive decisions issued by the authority as of the date of obligation related to the violated provision. A separate fine is applied for each rule that is violated.
Personal liability for company officers. Company officers cannot be held personally liable for errors and omissions in VAT declarations and reporting in Saudi Arabia since there are no provisions in the VAT legislation to assign a personal penalty or fine on the directors of the taxable person.
Statute of limitations. The statute of limitations in Saudi Araba is five years. Generally, the ZATCA may not issue or amend an assessment in respect of any tax period after a period of five years from the end of the calendar year in which the tax period falls. However, if a taxable person has an intent to breach the VAT provisions, the ZATCA may issue or amend assessments up to a period of 20 years from the end of the calendar year in which the tax period falls.
Tax amnesty. In March 2020, the ZATCA introduced economic relief initiatives to alleviate the economic impact of COVID-19 for businesses in the country. The initiatives included a tax amnesty program to provide relief to taxpayers from fines relating to tax returns, subject to certain conditions. The relief initially covered the period from 18 March to 30 June 2020 and was extended twice until 30 September 2020 and until 30 June 2021.
On 1 June 2022, the ZATCA announced the relaunch of the tax amnesty program, which was extended from 1 December 2022 for an additional six months until 31 May 2023. Subsequently, the tax authority granted further extensions until 30 June 2024, which covered VAT returns filed up to the tax period November 2023.
On 30 June 2024, the ZATCA announced through its website that it is further extending the cancellation of fines and exemption of financial penalties for certain taxes, starting from 1 July 2024 through 31 December 2024, which covers VAT returns filed up to the tax period May 2024. The tax authority has also published an updated English version of the simplified guide “Cancellation of Fines and Exemption of Financial Penalties,” with further information on the tax amnesty program, including the exemptions available to taxable persons.
The new and extended amnesty program covers the following:
• Exemption from unpaid fines for VAT returns filed up to the tax period of May 2024, including: Fines resulting from late registration under all tax laws and regulations
Delayed payment fines and overdue tax return submission fines under all tax laws and regulations
VAT return correction penalty
Fines for violations of VAT field detection and e-invoicing, based on Article 45 of the VAT law
• Exemption from late-payment fines in the instalment plan approved by the ZATCA on payments due after the end of the period of the initiative
• Exclusions for fines paid before 1 June 2022, as well as for fines resulting from tax evasion violations, including late registration, delayed payment, return amendments and field detection
The exemption shall be subject to specific conditions, including:
• Registration of non-registered persons in the tax system, where registration is mandated
• Submission to the ZATCA of all pending tax returns not previously submitted or correctly reported, and payment of the resulting tax debt principal; alternatively, applying for installments after submitting the returns