Understanding the VAT registration process is essential to start or expand your business in Saudi Arabia. With the implementation of Value Added Tax (VAT) in the Kingdom, companies must ensure compliance to avoid penalties. Whether you’re a startup or an established enterprise, registering for VAT is crucial in adhering to the country’s tax regulations.
This blog will break down VAT registration in Saudi Arabia, highlighting the requirements, key steps, and ways to help your business become VAT-compliant. Let’s get started!
Understanding VAT Registration in Saudi Arabia
Regarding VAT registration in KSA, businesses must have two primary options: Mandatory and voluntary. The choice between these depends on your business’s revenue and operational structure.
Let’s dive into the specifics to help you understand which category your business falls under and how it impacts on your VAT obligations.
Mandatory VAT Registration
Certain businesses in Saudi Arabia are required by law to register for VAT. The General Authority of Zakat and Tax (GAZT) defines clear conditions under which VAT registration becomes mandatory.
Revenue-Based Threshold
If your business generates SAR 375,000 (approximately USD 100,000) or more in taxable supplies over the past 12 months—or is projected to do so in the next 12 months—you are legally obligated to register for VAT.
Once this threshold is surpassed, you have a 30-day window to complete the registration process with GAZT.
Sector-Specific Mandates:
Regardless of whether a business meets the revenue threshold. The VAT registration is compulsory for specific sectors, including:
- Suppliers of designated goods and services: Businesses providing products or services specified by GAZT must register.
- Importers: Companies importing goods into Saudi Arabia must register for VAT.
- Businesses using the reverse charge mechanism: Registration is mandatory if your business is responsible for paying VAT on goods or services received from another entity.
Failing to comply with the mandatory VAT registration rules can result in severe penalties from GAZT, so ensuring your business is registered on time is essential.
Voluntary VAT Registration
Regarding VAT registration in KSA, not all businesses or services must register. Certain sectors and activities fall under specific exemptions provided by the Zakat, Tax, and Customs Authority (ZATCA).
In addition to these exemptions, ZATCA guidelines allow businesses to obtain a VAT registration number voluntarily. If they are residents of KSA and have made taxable supplies or incurred expenditures exceeding SAR 187,500 in the past 12 months.
For smaller businesses not meeting the mandatory threshold, voluntary VAT registration can be a strategic choice. Additionally, It offers financial and operational benefits, such as reclaiming VAT on purchases and enhancing credibility with more significant partners.
Key Advantages of Voluntary VAT Registration
- Recover VAT on expenses: Voluntary registration allows you to claim back VAT on your business-related purchases, positively impacting your bottom line.
- Elevate your market standing: Registering for VAT can signal your business’s compliance with regulations and financial maturity.
However, with voluntary registration comes the responsibility of adhering to VAT regulations. It includes filing regular returns and ensuring timely VAT payments. Carefully weigh the benefits and administrative requirements before deciding to register voluntarily.
By understanding the differences between mandatory and voluntary VAT registration in KSA. You can make informed decisions that align with your business strategy while staying compliant with Saudi VAT laws.
Exemptions from VAT Registration in Saudi Arabia
Regarding VAT registration in KSA, not all businesses or services must register, as certain sectors and activities fall under specific exemptions provided by the Zakat, Tax, and Customs Authority (ZATCA).
Exemptions from VAT Registration in KSA
Financial Services
The supply of financial services is generally exempt from VAT, except when a discrete amount is payable. Although the KSA VAT implementing regulations do not explicitly define financial services, they outline specific qualifying instances. These include:
- The issuance, transfer, or receipt of money, securities, or payment orders.
- The provision of credit or credit guarantees.
- The operation of current, deposit, or savings accounts.
- Financial instruments like derivatives, options, swaps, credit default swaps, and futures.
If any of these services involve an explicit fee, commission, or commercial discount as consideration, they are subject to VAT. Otherwise, they remain exempt.
In addition, the VAT regulations provide a non-exhaustive list of exempt financial services, such as:
- Interest or lending fees are charged with an implicit margin on loans, credit cards, or mortgages (including Musharaka arrangements).
- Fees with an implicit margin on financial products like finance leasing or Murabaha contracts.
- Commissions are charged with an implicit margin for brokerage services or under contracts like Mudaraba or Wakala.
- Issuance or transfer of debt or equity securities.
- Provision or transfer of life insurance contracts or their reinsurance.
Lease or License of Residential Real Estate
Leases, licenses, or residential real estate rentals intended for permanent human habitation are VAT-exempt. Residential property includes houses, flats, apartments, and primary residences such as student or school accommodation.
However, specific accommodations do not qualify as residential estates and are subject to VAT at 5%. These include:
- Hotels and inns
- Guest houses
- Motels and serviced accommodation
- Any building designed for temporary accommodation for visitors or travellers
These exemptions clarify when businesses or property owners in Saudi Arabia must register for VAT and when they are exempt, helping compliance with VAT regulations in the KSA.
Important VAT Announcements by ZATCA
Below are the vital VAT announcements by the ZATCA:
- Businesses registered under KSA VAT with a turnover exceeding SAR 4 million during 2022 or 2023 fall under wave 15 of phase 2. These businesses must integrate their ERP/POS systems with the Fatoora portal by 1st March 2025.
- Businesses registered under KSA VAT with a turnover exceeding SAR 5 million during 2022 or 2023 fall under wave 14 of phase 2. The ERP/POS integration deadline with the Fatoora portal is 1st February 2025.
- Businesses registered under KSA VAT with a turnover exceeding SAR 7 million during 2022 or 2023 fall under wave 13 of phase 2. The deadline for integrating their systems with the Fatoora portal is 1st January 2025.
These announcements highlight the gradual enforcement of VAT compliance and integration requirements, so businesses should take timely action to avoid penalties.
How to Register VAT in Saudi Arabia
To get your business compliant with Saudi Arabia’s tax rules, here’s a simple guide on registering for VAT.
Step 1: Access the ZATCA Website
Start by visiting the official ZATCA website.
Step 2: Access General Services
Find and click on the “General Services” tab. This option is typically located in the main menu or go to the bar at the top of the page.
Step 3: Click on VAT Registration
Locate and select the “VAT Registration” tab on the General Services page. This will direct you to the section where you can start the VAT registration process.
Step 4: Log In to the ZATCA Portal
Access the ZATCA portal by entering your ZATCA TIN, email address, and password. You can log in through the IAM Portal for convenience if you are a citizen or resident.
Step 5: Fill Out and Submit the Registration Form
After selecting the “VAT Registration” tab, complete the registration form with your business details and contact information. Review the form for accuracy, then submit it through the online portal.
Step 6: Receive Confirmation and VAT Certificate
Once submitted, you’ll receive confirmation from GAZT via email or the portal. After approval, you’ll get a VAT certificate confirming your registration. For the latest updates or changes, check the ZATCA website.
Documents for VAT registration in KSA
The documents mentioned below will help you to register your VAT in Saudi Arabia:
- Addresses, including email and contact details
- Company’s registration certificate and tax representative appointment (if needed)
- Copy of the company’s Memorandum of Association
- Business name and ID information
- Commercial Registration (CR) number
- GAZT electronic identification number (if available)
- Annual estimate of taxable products
- Copy of the owner’s ID or passport
- VAT registration date or requested date
Note: Make sure all documents are ready before starting the VAT registration process.
VAT Deregistration in KSA
Here’s a quick overview of the rules for VAT deregistration in KSA, including mandatory and voluntary conditions.
Mandatory Deregistration
You must apply for VAT deregistration within 30 days if:
- You stop performing economic activities.
- You cease making taxable supplies.
- Your supplies drop below SAR 187,500.
Note: If you’ve been registered for less than 12 months, you cannot deregister. The authority will determine and finalise your deregistration date.
Voluntary Deregistration
If you voluntarily registered for VAT, you can apply for deregistration if:
- You’ve been registered for at least 12 months.
- Your annual taxable turnover is below SAR 375,000.
VAT Compliance in Saudi Arabia: How Shuraa Tax Can Help
Understanding VAT registration in Saudi Arabia is crucial for compliance and smooth business operations. Whether you must register due to mandatory requirements or choose to do so voluntarily, staying informed about the process and exemptions is essential to avoid penalties and maximise potential benefits.
At Shuraa Tax, we offer expert guidance to make sure your VAT registration in Saudi Arabia is handled efficiently. From understanding regulatory requirements to completing the registration process and managing ongoing compliance, our team is here to assist you every step of the way.
Contact us today at +971508912062 or email info@shuraatax.com to streamline your VAT registration and stay ahead of your tax obligations.
Frequently Asked Questions
Q1. How do I obtain a Tax Identification Number (TIN) in Saudi Arabia?
Your TIN can be found on your VAT certificate, invoices, or any communication from GAZT.
Q2. What is the timeline for VAT registration in KSA?
VAT registration is completed online via the GAZT portal and typically takes 10 to 14 working days.
Q3. How do I register for VAT in Saudi Arabia?
Register electronically through the GAZT portal. Helps you have a TIN before starting the process. Detailed instructions are available on the GAZT website.
Q4. Is there a penalty for non-compliance with VAT regulations?
Yes, penalties for non-compliance can include fines and possible suspension of your business license.
Q5. What documents are required for VAT registration in Saudi Arabia?
Required documents generally include your business license, financial statements, and proof of address. Specific requirements may vary by business type.
