Second Version | May 2026

(8) Article 52, Calculating the value of Supplies, Unified VAT Agreement (9) Note the transitional provisions surrounding GCC states without VAT systems - see Section 9.1 (10) Article 5, Mandatory registration of Non-Residents obligated to pay Tax in the Kingdom, Implementing Regulations (11) Article 7, Voluntary Registration, Implementing Regulations and Article 51, Voluntary Registration, Unified VAT Agreement 5. Economic activities: specific cases 5.1. Employees and provision of personal services For VAT purposes, employees do not carry on an Economic Activity in respect of the services provided as part of employment. The Implementing Regulations state that: “Employed and other Persons in so far as they are bound to an employer by contract or by any other legal ties creating the relationship of employer and employee as regards working conditions, remuneration, and the employer’s liability, are not considered to be carrying on an Economic Activity...(12)“ This means that VAT is not charged on payments of salary or wages to an employee. Likewise, employees are not able to register for VAT in respect of their employment activities. Under Saudi employment law, an employment contract is defined as: “a contract concluded between an employer and an employee, whereby the latter undertakes to work under the management or supervision of the former for a wage.” Workers and other persons are regarded as employees to the extent that they are under an obligation towards the employer by contract or by any other legal ties creating the relationship of employer and employee as regards working conditions, remuneration, and the employer’s liability(13). Individuals who are not employees, but instead independently provide regular services under a services agreement or any other agreement with other persons, will be regarded as carrying on an Economic Activity for VAT purposes. These individuals may be required to register for VAT, depending on the value of Taxable Supplies made annually. In this way, the provision of identical services by persons operating under different contracts can have distinct VAT treatments. Example (5): Rima is a Saudi resident natural person who carries out IT consulting work for a number of companies on short-term contracts. She charges a daily rate of SAR 2,000 but does not sign a contract of employment with any of those companies. Consequently, Rima’s activities are treated (12) Article 9(6), Registration provisions applying to specific circumstances, Implementing Regulations (13) Article 50, Labor Law, enacted by Royal Decree No. M/51