About Value Added Tax

Value Added Tax (VAT) is an indirect tax imposed on all goods and services that are bought and sold by businesses, subject to certain exceptions. VAT is applied in more than 160 countries around the world, serving as a primary source of revenue that contributes to strengthening government budgets.

VAT is imposed at each stage of the supply chain, from production to distribution to the final sale of goods or services, as illustrated below:

The consumer pays the cost of VAT on the goods and services they purchase. Businesses, in return, remit the VAT collected from consumers to the government and recover VAT paid to their suppliers.

In June 2016, the Gulf Cooperation Council (GCC) member states agreed to introduce VAT across the GCC, and the Kingdom of Saudi Arabia ratified the Unified VAT Agreement in February 2017 (Jumada Al-Awwal 1438 AH). Within this framework, the Kingdom committed to implementing VAT at a rate of 5% starting January 1, 2018 (Rabi' Al-Thani 14, 1439 AH). On July 1, 2020, the VAT rate was increased to 15% on all taxable goods and services, following the issuance of Royal Order No. A/638 on May 11,2020, amending Article (2) of the Value Added Tax Law to increase the VAT rate from 5% to 15%.

The Zakat, Tax and Customs Authority (ZATCA) is responsible for administering and implementing VAT in the Kingdom of Saudi Arabia, in cooperation with all relevant entities.

For more information about Value Added Tax, please refer to the Guideline on Amending the Standard VAT Rate to 15%.

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