Version 3 | May 2026

Implementing VATin the Kingdom of Saudi Arabia The Kingdom of Saudi Arabia (KSA) ratified the Unified Agreement for Value Added Tax (‘VAT’) of the Cooperation Council for the Arab States of the Gulf pursuant to Royal Decree No. (M/51) dated 3rd Jumada al-Awwal 1438H/31st January 2017(“VAT Unified Agreement”). Based on the provisions enshrined in the VAT Unified Agreement, KSA issued the VAT Law under Royal Decree No. (M/113) dated 2nd Dhu al-Qa’dah 1438H/25th July 2017(the “VAT Law”), as well as the Implementing Regulations of the VAT Law, pursuant to Resolution of the Board of Directors of the former General Authority of Zakat and Tax (GAZT) currently the Zakat, Tax and Customs Authority (ZATCA) No. (3839) dated 14th Dhu al-Hijjah 1438H/5th September 2017 (the “Implementing Regulations”), as amended by subsequent Board Resolutions. 1.2 Zakat, Tax and Customs Authority (ZATCA) On 22nd Ramadan 1442H/ 4th May 2021, the Council of Ministers issued Decision No. (570), providing for the merger of the General Authority of Zakat and Tax (GAZT) and the General Customs Authority into a single entity under the name of Zakat, Tax and Customs Authority (ZATCA). Since then, the Authority has efficiently undertaken the collection of Zakat, taxes, and customs duties, ensuring the highest levels of compliance by taxpayers in alignment with best practices. The Authority’s mission is to enable the Kingdom to become a global logistics hub by facilitating trade, protecting national security, regulating all activities related to customs operations and customs ports, and managing them in a manner that ensures their advancement to the highest levels of efficiency, productivity, and competitiveness. This is achieved through the provision of high-quality, client-centered services offered in alignment with best practices. 1.3 What is VAT? It is an indirect tax levied on the import and supply of goods and services at each stage of production and distribution, with certain exceptions. VAT is applied in more than 160 countries worldwide. It is a consumption tax that is paid and collected at each stage of the supply chain, starting from the manufacturer’s purchase of raw materials and ending with the retailer’s sale of the final product to the consumer. Unlike other taxes, persons subject to VAT shall: y Collect VAT from their customers on each taxable sale transaction in accordance with the specified tax rate. y Pay VAT to suppliers, if any, from whom they received goods or services, equivalent to the unified tax rate for each taxable purchase transaction. When VAT taxable persons sell a good or provide a service, they must levy a 15% tax, assuming that the standard rate applies to such supplies, to be added to the final sale price. Taxable persons shall account for the 15% collected from taxable sales transactions separately from their revenues in order for it to be remitted subsequently to the Authority. The VAT collected by taxable persons on their sales is referred to as “Output Tax”. Purchases made by taxable persons are treated similarly: 15% VAT is added to purchases of goods and services made by persons subject to VAT, assuming that the standard rate applies to such supplies. The VAT paid by them to their suppliers is referred to as “Input Tax”.