What is VAT in Saudi Arabia?
- VAT is the short form of Value Added Tax
- VAT is an indirect tax imposed on goods and services
- VAT in Saudi is similar to those implemented in 160 countries
- VAT rate is among the lowest worldwide
- VAT is collected by businesses from their customers and then deposited with the government
- The General Authority of Zakat and Tax (GAZT) takes care of VAT administration in Saudi
Why VAT was Implemented?
All GCC countries had agreed among themselves in June, 2016 to implement VAT across the region. VAT will help Saudi and other GCC countries to develop an economic ecosystem which is less reliant on revenue from oil. Such a change will help government to undertake more development works and social welfare schemes.
In February 2017 (Jumada Al-Awwal 1438), Saudi Arabia ratified the GCC VAT framework and imposed VAT on January 1, 2018 (Rabi Al-Thani 14, 1439).
What is the VAT rate in Saudi?
At present, VAT is charged at a standard rate of 5%.
Below are the Saudi VAT rates for various Goods and Services:
| Food & Beverages | 5% |
| Domestic transportation | 5% |
| Commercial sale and rent | 5% |
| Residential sale | 5% |
| Hotels, inns, guest houses, motels and serviced accommodation rent | 5% |
| Private education | 5% |
| Private healthcare | 5% |
| Oil, oil derivatives and gas sector (domestic) | 5% |
| Investment gold, silver, and platinum (<99% pure) | 5% |
| Wired and wireless telecommunications and electronic services | 5% |
| Explicit fee, commission or commercial discount | 5% |
| Insurance products (including health insurance) | 5% |
| 5% | |
| Zero-rated Items | |
| International transportation (including intra-GCC) | 0% |
| Transportation services for Goods or passengers outside the Kingdom | 0% |
| Supply of a qualifying means of international transport (vehicle, vessel, aircraft) with special specification | 0% |
| Supply of replacement parts, consumables, maintenance and repair services for qualified transport (with special terms) | 0% |
| Medicine and medical equipment issued by KSA Ministry of Health and SFDA | 0% |
| Exports outside the GCC Territory | 0% |
| Services provided to non-GCC residents and consumed outside of Council Territory | 0% |
| Out of Scope Items | |
| Sale of own / close relative’s dwelling | out of scope |
| Public education | out of scope |
| Public healthcare | out of scope |
| Public services provided by government agencies which are not considered as an economic activity such as renewal of passport, driving license, etc | out of scope |
| Activity exercised by employees bound to an employer by contract | out of scope |
| Supplies made by members of a single tax group | out of scope |
| Exempt Items | |
| Residential rent | Exempt |
| Rent of housing for students | Exempt |
| Margin based products | Exempt |
| Operation of any current, deposit or savings account | Exempt |
| Insurance services and life reinsurance | Exempt |
| Interest or lending fees charged with an implicit margin for any form of lending (including loans and credit cards) | Exempt |
| Interest or lending fees charged with an implicit margin for finance (including finance leasing) | Exempt |
| Issue or transfer of a debt security or any other transferable monetary amount | Exempt |
