Saudi Arabian VAT Rates 2024

Value Added Tax (VAT) was introduced in the Kingdom of Saudi Arabia (KSA) in January 2018. At the time of introduction, the basic rate of VAT applied on taxable supplies and imports in KSA was 5%. 

On May 11, 2020, a decree was issued increasing the standard VAT rate to 15%, effective from July 1, 2020. The decree also outlined transitional rules for the VAT rate change to determine tax liability for taxable supplies and other special cases.

What is the current VAT rate in KSA?

The basic VAT rate in Saudi Arabia (KSA) is 15%, effective from 1 July 2020 as announced by Zakat, Tax and Customs Authority (ZATCA) on 1^st July 2020.

There are other goods and supplies determined b  Zero / Nil Rated supplies which are taxed at 0%.

List of supplies on which 0% VAT is charged

To qualify supply for zero rates, the supplier should be registered for VAT in KSA. Also, goods and services should be supplied in lieu of any monetary or non-monetary consideration.

Below is the list of supplies on which 0% VAT is charged:

• Exports of goods
• Services supplied to non-GCC residents
• International goods and passenger transport services
• Supply of Qualifying means of transport
• Qualifying medicines and qualifying Medical Goods
• The first supply, or supply for investment, of Qualifying Metals (gold, silver or platinum)

What are exempt supplies under KSA VAT?

Exempt supplies fall outside the scope of KSA VAT law and do not attract VAT. Businesses dealing with exempt supplies neither collect VAT on sales nor claim input VAT paid on purchases. Below are the exempted supplies under KSA VAT:

• Issuance or transfer of money or securities
• Credit
• Operation of current, deposit, and savings accounts
• Financial instruments
• Shari’ah-compliant Islamic finance products
• Interest on loans, credit, or debt securities
• Life insurance
• Residential real estate leases (excluding hotel and similar short-term rentals)

Transitional provisions for charging 15% VAT

Due to the revision of tax rates in KSA, there were high chances of ambiguity regarding accurate tax rates for the particular contracts and tax invoices issued before 11th May and completed in the transitional period or after completion. Therefore, transitional provisions were issued by Zakat, Tax and Customs Authority (ZATCA) to avoid any misuse of dates relating to the calculation of tax.

Below are some special cases mentioned in transitional provisions:

Contracts signed with government entities

Contracts signed between VAT registered persons
 

Tax invoices

List of goods and services on which 15% VAT is charged

All goods and services except exempt supplies and zero-rated supplies are subject to 15% VAT.

KSA VAT rate on imports and exports

Goods imported into the KSA on or after 1 July 2020 are subject to15% rate. However, the rate was 5% before the amendment of VAT rates in KSA.

Exports of goods and services outside the council territory are deemed zero-rated supplies, i.e. tax is charged at a 0% rate. Also, the business is allowed to recover the associated input VAT by provisions of VAT.