Saudi Arabia applies value added tax (VAT) to most goods and services. The tax is administered by the Zakat, Tax and Customs Authority (ZATCA). For consumers and residents, the main points are the 15% rate, prices displayed VAT included, e-invoices with a QR code, and the special treatment of rent and real estate. This guide also covers the rules businesses must follow, so you know what to expect on an invoice.
In short: VAT is 15% since 1 July 2020 and is already included in displayed prices. Residential rent is exempt and qualifying medicines are zero-rated.
The rate
| Period | Standard rate |
|---|---|
| From the introduction of VAT | 5% |
| Since 1 July 2020 | 15% |
ZATCA defines VAT as an indirect tax on goods and services bought and sold by businesses, with a few exceptions. The final consumer bears it through the price; businesses collect it and pay it to ZATCA.
The 15% rate applies to most everyday purchases: shopping, restaurants, telecom services, cars, hotels.
Prices include VAT
ZATCA requires that prices published in the local market for goods and services include VAT. The price on the shelf, the menu or the website is the price you pay.
Calculating the VAT in a price
- Price before VAT = price including VAT ÷ 1.15
- VAT = price including VAT − price before VAT
- From a price before VAT: price including VAT = price before VAT × 1.15
| Price paid (VAT included) | Price before VAT | VAT (15%) |
|---|---|---|
| SAR 23 | SAR 20 | SAR 3 |
| SAR 115 | SAR 100 | SAR 15 |
| SAR 1,150 | SAR 1,000 | SAR 150 |
| SAR 5,750 | SAR 5,000 | SAR 750 |
| SAR 115,000 | SAR 100,000 | SAR 15,000 |
Use our VAT calculator to do it in one click.
Watch out: the VAT share of a price is not 15% of the price you pay, but 15/115, about 13.04%. For SAR 115 paid, the VAT is SAR 15, not SAR 17.25.
What is exempt or zero-rated
ZATCA’s guidelines distinguish:
- Exempt supplies: no VAT is charged. They include residential rent and certain financial services (exempt financial services).
- Zero-rated supplies: VAT at 0%. They include qualifying medicines and medical goods, as specified by the Ministry of Health or another competent authority.
Most other everyday purchases carry the full 15%.
Rent and real estate
ZATCA’s guide on the Real Estate Transactions Tax (RETT) summarises how property is treated:
| Transaction | VAT | Real estate transactions tax |
|---|---|---|
| Sale of a residential property | Exempt | 5% |
| Sale of a commercial property | Exempt | 5% |
| Sale of land (residential, commercial or agricultural) | Exempt | 5% |
| Lease of a residential property (under 50 years) | Exempt | Not applicable |
| Lease of a commercial property (under 50 years) | 15% | Not applicable |
The 5% real estate transactions tax applies to sales and similar transactions: sale, bequest, financial leasing, lease-to-own and usufruct contracts of more than 50 years. It is calculated on the agreed price, which must not be below the fair market value, and the seller must pay it before or during the transfer.
For Saudi citizens buying a first home, the State bears the tax on up to SAR 1,000,000 of the price.
Tip: if you rent a flat to live in, your rent should not include VAT. If you rent an office or a shop, 15% VAT applies.
Invoices and QR codes
Electronic invoicing (FATOORA)
Since 4 December 2021, VAT-registered businesses must issue invoices through a compliant e-invoicing system. Online cash registers, tablet registers, invoicing software and cloud solutions can qualify. Manual and handwritten invoices are no longer compliant tax invoices, and issued e-invoices may not be deleted.
A second phase, started on 1 January 2023, connects businesses’ invoicing systems to ZATCA in waves; each group is told at least six months in advance.
Two kinds of invoice
| Invoice | Usually issued | QR code |
|---|---|---|
| Tax invoice | Business to business (B2B) | Optional in phase one |
| Simplified tax invoice | Business to consumer (B2C), e.g. shops, restaurants | Mandatory |
On a simplified tax invoice:
- the invoice shows the total including VAT;
- a QR code is mandatory.
When you scan the QR code, you should see at least: the seller’s name, the seller’s VAT registration number, the date and time of the invoice, the total with VAT and the VAT amount.
ZATCA also lets small businesses issue simplified invoices with fewer details; for invoices under SAR 1,000, the supplier’s VAT number is not required on that simplified format.
Checking an invoice
ZATCA offers an e-invoice validation service on its website to check an invoice, and a verification service to check a VAT registration number.
For businesses: thresholds
| Annual taxable supplies (12 months) | Rule |
|---|---|
| Above SAR 375,000 | Mandatory VAT registration |
| Above SAR 187,500 | Voluntary registration possible |
| Up to SAR 5 million | Cash-basis accounting allowed |
| Up to SAR 40 million | Annual VAT return option |
If you start a business or freelance activity in Saudi Arabia, check these thresholds with ZATCA or a licensed accountant.
Common mistakes
- Adding 15% to a shelf price: displayed prices already include VAT.
- Calculating VAT as 15% of the total: the VAT share is 15/115 of a VAT-inclusive price.
- Paying VAT on residential rent: residential leases are exempt.
- Accepting a handwritten invoice from a VAT-registered business for an expense you need to justify: it is not a compliant tax invoice.
Frequently asked questions
What is the VAT rate in Saudi Arabia?
The standard rate is 15%, in force since 1 July 2020. It replaced the 5% rate applied since VAT was introduced.
Are prices in Saudi Arabia shown with VAT?
Yes. ZATCA requires published prices for goods and services in the local market to include VAT.
Is residential rent subject to VAT in Saudi Arabia?
No. Residential rent is an exempt supply. Commercial real estate follows different rules.
How do I calculate VAT from a price that includes it?
Divide the VAT-inclusive price by 1.15 to get the price before VAT. The VAT is the difference. For SAR 115, the price before VAT is SAR 100 and the VAT SAR 15.
When must a business register for VAT?
When its taxable supplies over 12 months exceed SAR 375,000. Voluntary registration is possible from SAR 187,500.
Is VAT charged when buying a property in Saudi Arabia?
No. Since the Real Estate Transactions Tax was introduced, the sale of real estate is exempt from VAT and subject instead to a 5% real estate transactions tax on the property value, which the seller must pay before or during the transfer.
Is a handwritten invoice valid in Saudi Arabia?
No. Since 4 December 2021, VAT-registered businesses must issue invoices through a compliant e-invoicing system; manual or handwritten invoices are no longer considered compliant tax invoices.
Official sources
- ZATCA — Value Added Tax: definition of VAT, simplified invoices under SAR 1,000, cash basis up to SAR 5 million, annual return up to SAR 40 million.
- ZATCA — Guideline on input tax deduction (July 2020): rate of 15% from 1 July 2020, exempt residential rent and financial services.
- ZATCA — Healthcare VAT guideline: zero rate for qualifying medicines and medical goods.
- ZATCA — Guideline for tax invoicing and records: prices including VAT, invoice requirements.
- ZATCA — Simplified guide to e-invoicing (FATOORA): phase one from 4 December 2021, phase two from 1 January 2023, tax and simplified invoices, QR code, prohibited practices.
- ZATCA — Minimum fields after scanning a QR code: seller name, VAT number, time stamp, total and VAT.
- ZATCA — E-invoice validation: checking an e-invoice.
- ZATCA — Simplified guide to the real estate transactions tax: 5% RETT, VAT exemption of property sales, treatment of leases, first home of citizens.
- ZATCA — SMEs guidelines: SAR 375,000 and SAR 187,500 registration thresholds.
This information is for guidance only and may change. Always check with the relevant authority or its official website before starting a procedure. Spotted an error? Tell us.
