Saudi Arabia VAT Rate 2025: Zero Rated, Exempted Supplies and Transitional Period

VAT in Saudi Arabia (Value Added Tax) was introduced in 2018, with the initial rate set at 5%. However, the government increased the VAT rate to 15% starting from July 1, 2020. VAT in KSA, regulated by the Zakat, Tax and Customs Authority (ZATCA), applies to most goods and services within the Kingdom, with zero-rated and VAT exempted supplies in KSA.

This blog provides an in-depth analysis of Saudi Arabia VAT rates in 2025, including taxable supplies, zero-rated goods, exemptions, VAT on gold in KSA, the VAT rate during the transitional period, and other essential details.

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 11^1th May 2020. Previously, it was 5%. Currently, the applicable VAT rates in KSA are mainly categorized into three categories.

• Standard-rated supplies: Most goods and services are taxed at 15%.
• Zero-rated supplies: Certain goods and services are subject to a 0% VAT rate, allowing businesses to claim back VAT paid on inputs.
• Exempt supplies: Goods and services that fall outside the scope of VAT, meaning VAT is neither collected nor reclaimable.

List of Goods and Services with 15% VAT Rate

Most goods and services in Saudi Arabia fall under the standard VAT rate of 15%. These include:

Examples of Standard-Rated Supplies:

• Food and Beverages: All food products, excluding those that qualify for exemption.
• Commercial Rent and Sales: Sale or lease of commercial buildings.
• Private Healthcare and Education: Services provided by private institutions.
• Telecommunication Services: Internet, mobile services, and other communication services.
• Transportation: Local transportation, excluding international travel.

Zero-Rated VAT Supplies in Saudi Arabia

Zero-rated supplies are taxable at 0% VAT, enabling businesses to reclaim VAT paid on their purchases. This category is crucial for export-driven industries and specific sectors.

Below is the list of nil-rated supplies VAT Supplies in KSA:

• 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)

KSA VAT Exempted Supplies

Exempt supplies fall outside the scope of KSA VAT law and do not attract VAT.  As per the VAT Exemption Rules in Saudi Arabia, businesses dealing with exempt supplies neither collect VAT on sales nor claim input VAT paid on purchases. 

• 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:

VAT Rate on Imports and Exports in KSA

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.

Conclusion

VAT in Saudi Arabia is crucial for businesses to generate e-invoices and normal VAT invoices as per ZATCA rules. The 15% VAT rate applies to most goods and services, with specific rules for zero-rated supplies like exports and exempt categories such as residential real estate and financial services. 

Businesses must know the exact difference between KSA VAT exemptions and zero-rated VAT supplies in KSA to file input VAT credit correctly in VAT returns.