Frequently Asked Question about VAT in Saudi Arabia (FAQ)

The page aims to provide basic information on the introduction of VAT in the Kingdom of Saudi Arabia and frequently asked questions related to it.

Q. What is value added tax (VAT) and how does it work?

A. Value Added Tax (or VAT) is an indirect tax which is imposed on all goods and services that are bought and sold by businesses, with a few exceptions. VAT is used in more than 160 countries around the world as a reliable source of revenue for state budgets.

 

Q. When will VAT be introduced?

A. VAT will be introduced in Saudi Arabia on January 1st 2018.

 

Q. Why is VAT being introduced?

A. The unified VAT agreement for the GCC treaty for a unified framework agreement to introduce VAT came into application. In line with the framework, Saudi Arabia is introducing Value Added Tax (VAT) on 1st January 2018.

The introduction of VAT is a key part of the Kingdom’s broader plan to improve fiscal sustainability and diversify government revenues. VAT will provide a stable and sustainable source of funds to support the country’s ambitious programme of transformation, including investment in economic development, diversification and public services. This will have real benefits which will positively affect the public and businesses of all sizes across Saudi Arabia.

 

Q. Where can I access VAT Law?

A. The VAT Law, that was published in H1438/11/4, is available in full here

Q. Will VAT cover all goods and services?

 All goods and services will be subject to VAT. However, some goods and services will be exempt. For further information on exempted items please read the list of goods and services subject to VAT on the following link

A . The VAT rate will be set at a standard rate of 5%. Some goods and services will be zero rated. For further information on zero rated items please read the list of goods and services subject to VAT on the following link 

Q. 

A. No company is entitled to charge VAT on any of their goods and services before the implementation date, which is January 1st 2018.

Q. What impact will VAT have on prices?

A. Overall, businesses will not pay higher pre-tax prices for input goods and services. Costs should not change because businesses are able to deduct their input VAT from their output VAT. The end-consumer, however, will not collect or be able to deduct any VAT. Therefore, end-consumers will initially experience a 5% price increase, compared to before the tax was implemented.

Q. What are GAZT’s Roles and Responsibilities regarding VAT?

A. The General Authority of Zakat & Tax (GAZT) is the authority in charge for the implementation and administration of VAT in KSA. GAZT is responsible for the registration and deregistration of taxable persons for VAT, to administer VAT return filing and VAT refunds as well as to undertake audits and  VAT inspection visits. GAZT also has the power to levy penalties for non-compliance with stipulated VAT regulations.

Q. Where can I find more detail on the introduction of VAT?

A. You are encouraged to continually engage with VAT resources in order to stay up to date with the latest details on VAT introduction. All information will be available on this website. If additional questions arise, these may be addressed with a VAT customer service agent on the VAT social media channels, or on the dedicated VAT hotline.

For further detailed information please refer to the detailed technical FAQ page on the following link 

Please note that in the event of any conflict between the content of this page and the provisions of VAT Law and VAT draft Implementing Regulations, the Laws and Regulations shall prevail.

Taken from GATZ website -https://www.vat.gov.sa/en/introduction-to-vat/faq/general-faqs