1Issue 3 | May 2026

VAT Calculation Using the Invoice Basis Under the general rule applying the invoice basis of accounting, Output VAT must be declared by the Supplier in the tax period in which the tax point occurs. Generally, Input VAT may be deducted by the Customer (where applicable) in the tax period in which the tax invoice is issued. Example 10: A furniture store located in the Kingdom files quarterly VAT returns. The store requests a Customer to pay a deposit (advance payment) to purchase a table. The deposit represents 10% of the value of the goods, amounting to SAR 950. The total value of the table is SAR 9,500, inclusive of VAT. An invoice for the advance payment is issued on 10 December, and the Customer pays the deposit on the same day. Thirty days later, on 9th January, the furniture store issues a second invoice for the remaining 90% of the amount due (SAR 8,550). The amount of SAR 8,550 is paid by the Customer on 18 January. The furniture store must account for Output VAT of SAR 123.91, included within the advance payment of SAR 950, in its VAT return for the tax period ending 31 December, and remit this tax to ZATCA. The furniture store must then account for VAT on the remaining amount (SAR 1,115.22) Included within the value of the final payment of SAR 8,550, in its VAT return for the tax period ending 31st March of the following year. Example 11: An online retailer in the Kingdom, filing quarterly VAT returns, sells a watch on 28th March. The Customer pays online at the time the watch is ordered, and the tax invoice (receipt) is automatically issued. The retailer arranges delivery (transportation) of the watch to the Customer’s home address in the Kingdom. Transportation of the watch begins on 1 April, and the Customer receives the watch on 2nd April. The date of supply of the watch is the date on which transportation commenced (1st April). However, the tax point is 28th March, as the receipt was issued and payment was received before the goods were transported. The retailer must declare the VAT due on the sale of the watch in the VAT return for the quarterly tax period ending 31st March. 5.3 VAT Calculation on a Cash Accounting Basis The general rule for VAT calculation set out above does not apply to businesses that have been approved to use the cash accounting basis. 5.3.1 Application for Approval to Use Cash Accounting A Taxable Person may apply for approval to use the cash accounting basis, provided that: y The annual value of taxable supplies in the previous calendar year did not exceed SAR y It is not expected that the anticipated value of taxable supplies in the current calendar year will exceed SAR 5,000,000; and y The Taxable Person has not received notification of any violation during the previous 12 months(22). A Taxable Person may apply for approval to use the cash accounting basis when registering for VAT or upon obtaining a Tax Identification Number (TIN) from ZATCA. If the Taxable Person does not elect to use the cash accounting basis at that stage, they may subsequently submit a request to the ZATCA to apply it(23). ZATCA will notify the Taxable Person if the application is approved and, where applicable, inform them of the effective date of the change from the invoice basis to the cash accounting basis. (22)  Article 46, Implementing Regulations. (23)  Article 46, Implementing Regulations.