VAT Guide for Saudi Arabia

VAT in Saudi Arabia

The Kingdom of Saudi Arabia (KSA) is the largest country in the Arabia peninsula. There is no threshold for VAT registration; if sales are made by a foreign entity it is mandatory.

The standard VAT rate increased from 5% to 15% in 2020.

Importing into KSA

Goods can only be imported into Saudi Arabia by a company incorporated there. This means that a non-domestic business cannot be a registered importer or reclaim any import VAT.

Distance Sales by foreign entities

Any distance sales made into the KSA are subject to VAT on import.

B2C Distance Sales: as a foreign business cannot be the recorder importer, the import VAT must be paid to a shipping agent to remit at the border; and will not be reclaimable by the seller. At the point of sale, the seller should also collect VAT from the purchaser and remit this via VAT return. No threshold applies; registration is required from the first sale made.

B2B Distance Sales: distance sales made to KSA incorporated businesses respectively trigger no liabilities for sellers. It is responsibility of the purchasing entity to account for import VAT and offset the VAT using the reverse charge mechanism. Nos sales VAT is applicable to B2B transactions. There is no VAT registration or requirement for the seller although it is their responsibility to correctly identify which customers meet these criteria.

Importing to store and Sell

The import VAT is non-reclaimable tax so it must be considered an expense by the seller.

If you are selling you products or goods through an online marketplace VAT must be collected on all sales, the marketplace is not responsible for collecting VAT.

Penalty Structure

• Late filing: between 5 and 25% of VAT due for that period.
• Late payment: 5% of the value of outstanding tax for each month the tax remains unpaid.
• Failure to register: SAR 10,000

Gulf Cooperation Council (GCC)

The Cooperation Council for the Arab States of the Gulf (GCC) is a regional organization of 4 member states: Bahrain, Kuwait, Oman, Qatar, KSA and the UAE.

Registering in one of these states allows a seller access to the GCC Common Market (CM).

 VAT on Intra GCC supplies

Under the GCC distance sales scheme, a VAT registered company can sell goods with transport to private individuals and non-registered businesses in other member states.

VAT would be charged at the departure country rate and declared on the respective VAT return until distance selling mandatory registration thresholds are reached.

Once these thresholds are breached, supplies made to those arrival countries must be charged at the arrival country rate, and the supplier will be required to register and comply with VAT obligations in that member state.

The threshold is 375,000 SAR in 12 month period, or the local equivalent in that member state.