VAT in Saudi Arabia – Is your business Ready ?

As the deadline for implementing VAT is fast approaching – 01 Jan 2018, there is increasing concern for organizations to ensure that their accounting system are VAT ready. The fact that  there will be a penalty of SR 100,000 for those who are not VAT ready with a proper book keeping and accounting system, it  is creating lot of worries amidst companies and business owners. There is no need to worry – we can advise you the simple solution on how to prepare your business to be VAT ready in this article.


We have already written article how it effects the expatriates individuals in General ( see


Below here , we are writing How VAT is affecting business and companies in Saudi Arabia and how to overcome the problems.


We have divided this section into following parts as follows. You can jump directly to each part by clicking it or scrolling down


What is VAT

Who has to pay VAT

VAT rates

Penalty for not implementing VAT

VAT process – How it works.

Implementing VAT


What is VAT?

Value Added Tax (or VAT) is an indirect tax imposed on all goods and services that are bought and sold by businesses, with a few exceptions. VAT is applied in more than 160 countries around the world. The consumer pays the VAT (Value Added Tax) on cost of purchased goods and services.

Companies / Businesses pay the government the VAT collected from their customers’ purchases and the government refunds the VAT they paid to their suppliers.

The General Authority of Zakat and Tax (GAZT) is responsible for managing the implementation, administration and enforcement of VAT in Saudi Arabia. It does so in close coordination with other relevant entities.


Who has to pay VAT


Vat eligibility in Saudi Arabia is determined by your Annual Revenue.

Any company whose annual revenue is less than SR 187,500 does not have to pay VAT.


Companies whose annual revenue is between SR 187,500 to SR 375,000 can voluntarily register for VAT. However, voluntary registration provides significant benefits for the companies since it allows the deduction of input tax.


Companies whose annual revenue is more than SR 375,000 has to register for VAT. VAT is paid on all goods and supplies, however there are some exemptions..


VAT rates

Rate of VAT is determined by the Good and Services You Deal With.

There are 4 categories of goods as per VAT point of view


  1. VAT Exempt Category


  • Financial Services
  • Insurance
  • Rent and supply of residential real estate
  • Military
  • Charitable


  1. Zero Rated Goods


  • Medicine and medical equipments
  • Goods and passenger transportation.
  • Supply of gold, silver and platinum. (Purity : 99%)
  • All sales that are considered as exports.
  1. Regular 5% Vat


All Goods and Services with the exception of the other mentioned in the other categories are imposed a standard VAT rate of 5%.


  1. Sin Tax

This tax is already implemented since mid June 2017. It applies to the following goods:

  • Tobacco products and energy drinks at 100% VAT
  • Soft drinks at 50% VAT



As per law, a penalty of SR 100,000 maybe imposed by government.(Chapter Sixteen – Tax Evasion and Penalties – article 44 of  Value Added Tax Law for more details see


VAT process – How it works.

The process of incorporating VAT into the accounts is simple but cumbersome. First of all, you have to calculate the tax collected from the sales that you have made. Then you have to calculate what  is due from the government based on the VAT that you have paid (also called as VAT credits). Then you have to take the difference of the two and pay to the Government and submit the report as per Government mandated reporting guidelines.


Implementing VAT

As we have mentioned earlier, the process of incorporating VAT into the accounts is simple but cumbersome. First of all, you have to calculate the tax collected from the sales that you have made. Then you have to calculate what  is due from the government based on the VAT that you have paid (also called as VAT credits). Then you have to take the difference of the two and pay to the Government and submit the report as per Government mandated reporting guidelines. The whole process can be simple when you have it automated using a proper accounting software. Do the whole thing manually or using Excel is time consuming and prone to mistakes. At the end, the VAT filing report may not be as per government format.

A VAT ready ERP approved may be the ideal solution for your business if you are looking to bring in more efficiency to your workflow. Needless to say, it will be well nigh impossible to maintain the records and generate the VAT reports using any manual workflow or excel sheets. In order to make sure, you are free from any headache related to VAT compliance, it is best to use a VAT ready ERP.


We used one such accounting software which is GATZ approved . The HAL ERP which is a VAT ready accounting system as well as a full fledged ERP solution not only provides reports in GAZT approved format but also helps providing best accounting practices to help achieve greater efficiency in our business.. There quite a few softwares but we found the HAL software good for the following reasons:


  • GAZT approved

It is extremely important to check if the software you are using has the Invoice format approved by GAZT (General Authority of Zakath & Tax)  as this will make sure that you are generating the Invoices in the correct format.  A GAZT approval or recommendation will also mean that the software has been reviewed and verified by the GAZT official. It will also help you in generating the VAT filing formats as per the Government approved template. This is very important when we make the quarterly report for VAT filing. We found that HAL ERP is approved and recommended by GAZT. As per GATZ, they have signed a formal MoU as well.


  • Instant use & easy setup



The smartest feature of HAL ERP is that it extremely easy to set it up and run. It will take hardly 5 minutes to start using the software. No lengthy installation process or instructions to follow. It is just online signup and use. As simple as that. It is so simple, anyone with basic knowledge of computer can used. Plus what I really liked is the guided tour they have for new beginner. I challenge to just sign up for the free version and tell me if it not easy. Click on . Leave your comments below if you do not agree after using it.




  • Free to start


As a business owner, we will want to think twice before spending your money. Especially under the current situation. This is where HAL ERP is the best – because it lets you test the software for free – they give you a trial time of 2 weeks to fully explore their system. During this time, you have all the luxury to decide on the product – the different features and the support. The Product also comes with Live chat option where their Programmers are available to help clear any questions you may have about implementing the accounting program for your business.



  • Scaleable


It has the best infrastructure on the cloud and hence they can scale anytime and where. Increasing the number of users is as simple as clicking a button. The system is completely capable of handling all the transactional load without compromising on the performance..


  • Data Protection

 Your data is your most valuable asset and protecting it should be your responsibility. With the traditional on premise server, you have to take care of the data by constantly backing up and keeping physical copies. However, with HAL ERP, all the data is safe and secure with their state of the art back up technology which is similar to Facebook.



  • Dual Language


Being in Saudi Arabia, it is important to have Arabic and English language support. HAL ERP is completely bilingual and it can generate Invoice in English as well as Arabic. You should take special care of this as the Government has made it compulsory to have the feature to have Arabic in the invoice.



  • Device independent


You can run this software on any device or computer. – Windows/ MacOS – Android/ Windows – it is completely your choice. You can use the software from any device by simply signing in much like how you access your e-mail..



  • Support


They have online chat facility. You can get legal support and guidance related to VAT accounting from their team of expert accountants. The best thing is they have online support box inside the software for quick access.



  • Affordable


The best thing about the software is that it very affordable. The  Gold membership is only SR 199 per user per month. That is hardly 6 Riyal a day which is less than a cup of coffee at Starbucks !!!


With all their features and the GAZT approval, it is a highly recommended solution. Try for free by clicking the link below –