Saudi Arabia consults on VAT reforms

Zakat publishes proposed VAT changes to improve compliance and standardise to international rules

Proposed amendments to the Saudi Arabian VAT regulations have been put out to consultation by Zakat, Tax and Customs Authority. These will introduce a range of updates to the VAT regime to help improve ease of compliance and align the indirect tax regime with international standards. Saudi Arabia implemented VAT in 2018, and the Saudi Arabia VAT 15% standard rate.

The reforms relate to the VAT Implementing Regulations which supplement the KSA VAT Law. The Regulations clarify how the VAT Law is applied in practice, providing detailed guidance on registration, invoicing, returns, and payment. They also specify how VAT applies to cross-border transactions, goods and services within the Gulf Cooperation Council (GCC), and rules for input tax deductions.

The key changes include:

• New criteria and rules on tax groupings and registrations, particularly when changes to the group and control;
• Deadlines for issuing credit notes; matching them to invoicing requirements
• Reverse charge rules;
• E-commerce guidelines on the deemed supplier rules plus digital platforms involved in digital services;
• Targeted measures for tourism sector;
• VAT credits and refunds (including for non-resident businesses with more guidance on rights and process);
• Submitting tax appeals.

The consultation will be open until 17 September 2024.

Saudi Arabia VAT since 2018

Saudi Arabia introduced Value-Added Tax (VAT) in January 2018 as part of its Vision 2030 plan to diversify its economy away from oil. The VAT system is governed by the VAT Law and Implementing Regulations issued by the General Authority of Zakat and Tax (GAZT), now known as the Zakat, Tax, and Customs Authority (ZATCA).

Under Saudi VAT law, a standard VAT rate of 15% is applied to most goods and services, though some items such as healthcare, education, and financial services may be exempt or zero-rated. Businesses that meet the mandatory annual turnover threshold (SAR 375,000) are required to register for VAT, collect VAT on sales, and remit it to the government. Voluntary registration is allowed for businesses with turnover exceeding SAR 187,500.

Compliance with VAT obligations is monitored through audits, penalties, and fines, ensuring businesses correctly apply VAT and maintain proper records for tax submissions.

Arab Gulf GCC VAT implementations