Tax rate by region Saudi Arabia

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The information provided on this page is intended for general informative purposes only. It should not be interpreted as tax advice, nor is it meant to be. For advice on your particular tax responsibilities, consult with an experienced tax expert. PayPro Global does not assume any responsibility for any action taken or not taken based on the information presented here.

VAT on SaaS in Saudi Arabia: What Businesses Need to Know

Businesses selling SaaS in Saudi Arabia are subject to VAT (Value Added Tax) at a standard rate of 15%. Implemented in 2018, the VAT system in Saudi Arabia aligns with international best practices and contributes to diversifying the economy and generating additional public revenue. With the exception of a few specific categories, all goods and services, including SaaS, are subject to the standard VAT rate. It is crucial for businesses to register for VAT if their annual turnover exceeds SAR 375,000 or if they expect it to exceed this threshold within the next 30 days.

For foreign providers of digital services (B2C), there is no threshold. Registration is mandatory from the first taxable supply to a non-VAT registered customer.

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Saudi Arabia

Saudi Arabia implemented a VAT system in 2018 to diversify its economy and enhance public revenue.

Official government link: Zakat, Tax and Customs Authority

15.00%

E-products and services VAT/Sales tax rate

Reduced tax rate product categories

No digital goods or services with reduced tax

Exempted product categories

No digital goods or services exempt

Reverse charge mechanism for B2B sales

Yes

Tax ID validation required

Yes

When do you have to register

Once the threshold has been exceeded.

Non-resident digital service providers must register from the first taxable supply.

Online registration possible

Yes

Local representative needed

Yes

Registration procedure

To register for VAT in Saudi Arabia, businesses first need to have a valid Tax Identification Number (TIN). During registration, the tax authority will ask for financial information like estimated taxable sales and expenses for the upcoming year, as well as actual figures for the past 12 months.

Businesses can also register voluntarily for VAT even if they haven’t reached the mandatory threshold, as long as their taxable sales in the past 12 months were at least half of the registration threshold (SAR 187,500).

List of digital and electronic services liable for tax

Streaming services, such as Netflix, Amazon Prime, and Spotify;
App and software downloads, including games, productivity software, and mobile apps;
E-books and digital publications;
Online advertising, including display ads, social media ads, and sponsored content;
Cloud-based services, such as storage, computing, and software-as-a-service (SaaS) solutions;
Online marketplaces and e-commerce platforms, including Amazon, eBay, and Souq.com;
Online education and training courses;
Online gaming, including in-game purchases and subscriptions;
Digital financial services, such as online banking and payment processing;
Web hosting and domain registration services.

Penalties

Late Filing of VAT Return:

Penalty: Not less than 5% and not more than 25% of the tax due.
This penalty applies even if there’s no tax due (nil return) or if you have excess recoverable VAT.
2. Late Payment of VAT:

Initial Fine: 5% of the unpaid tax amount.
Additional Penalty: An additional penalty of 1% of the unpaid tax amount is levied for each month or part of a month that the tax remains unpaid.
3. Other Violations:

Failure to issue a Tax Invoice or issuing an incorrect Tax Invoice: A fine of up to three times the value of the supply.
Failure to keep proper records or submitting incorrect information: A fine of up to SAR 10,000 (approximately 2,600 USD).
Tax evasion: A fine of up to five times the tax due, imprisonment, or both.

Registration threshold

No threshold for foreign providers of digital services (B2C). Registration is mandatory from the first taxable supply to a non-VAT registered customer.

Filing interval

Quarterly (<SAR 40M)
Monthly (>SAR 40M)

Filing deadline

Last day of the following month after the tax period

E-invoicing requirements

Yes

 

Exemption: Non-resident suppliers are currently exempt from the mandatory “Fatoora” e-invoicing integration (Phase 1 & 2).

Record keeping

In Saudi Arabia, taxpayers need to maintain proper VAT records for at least 6 years. These records should include issued tax invoices, accounting books, bank statements, and other financial documents. These records can be kept either in physical or electronic format, but must be readily available for inspection by the tax authorities if requested.

How-To Guides: Saudi Arabia SaaS VAT

Step: 1 Threshold

Effective January 1, 2018, Saudi Arabia requires non-resident vendors (including online platforms) of
digital services to consumers (B2C) in Saudi Arabia to register for and collect VAT, regardless of the
sales amount.

On March 2, 2021, the Zakat, Tax and Customs Authority (ZATCA) of Saudi Arabia published VAT
guidelines for online stores in which it clarified that online stores whose annual sales exceed SAR
375,000 must:

(1) obtain commercial registration;

(2) register for VAT and display the VAT certificate on
their online platform;

and (3) file tax returns and pay tax liabilities.

Online stores are digital platforms that
are engaged in commercial activities through websites, social media platforms, instant messaging
applications, and shopping applications.

On August 30, 2021, the ZATCA issued guidelines on the VAT treatment of e-commerce transactions.
The guidelines clarify the VAT implications of different e-commerce business models including that ecommerce booking services would be subject to VAT based on the underlying transaction.

No threshold for foreign providers of digital services (B2C). Registration is mandatory from the first taxable supply to a non-VAT registered customer.

Step: 2 Business Registration

Register online via the ZATCA (Zakat, Tax and Customs Authority) portal. Non-resident businesses can register directly or appoint a Tax Representative to handle compliance.

Step: 3 TIN/VAT Number

Get your VAT Account Number, which is a 15-digit number (usually starting and ending with 3).

Step: 1 Standard VAT Rate

The standard VAT rate in Saudi Arabia is 15%.

Step: 2 VAT Formula

To calculate your tax amount, use the following formula:

Tax Amount = Net Price x 15%

Step: 3 Reverse Charge (B2B)

Yes. Foreign suppliers do not charge VAT on B2B sales to registered Saudi businesses. The local buyer accounts for the tax under the Reverse Charge Mechanism.

Step: 1 Selling B2C

Charge 15% VAT on digital services sold to individuals (non-business customers) in Saudi Arabia.

Step: 2 Selling B2B

Do not charge VAT. Validate the customer’s VAT Number. The customer is responsible for the tax liability.

Step: 3 Invoice Requirements

You must issue a valid commercial invoice containing:

• Supplier Name, Address & VAT Number
• Customer Name & Address
• Date of Issue
• Description of Services
• VAT Rate & Amount (or Reverse Charge note)

 

Exemption: Non-resident suppliers are currently exempt from the mandatory “Fatoora” e-invoicing integration (Phase 1 & 2).

Step: 1 Filing Interval

Taxes should be filed quarterly (for annual turnover below SAR 40 million) or monthly (for annual turnover above SAR 40 million).

Step: 2 Filing Deadline

Taxes should be filed by the last day of the month following the tax period (e.g., April 30 for Q1).

Step: 3 Submission

File returns are made electronically via the ZATCA portal. Payments are made via the SADAD payment system or bank transfer to ZATCA’s account.

Step: 4 Record Keeping

Records should be kept for a minimum of 6 years.

PayPro Global Solution: Simplified Registration & Fiscal Representation

Navigating Saudi Arabia VAT registration and fiscal representation can be daunting. PayPro Global acts as your Merchant of Record, handling these complexities, including VAT registration and fiscal representation where needed, so you can focus on your business.

Learn more about our MoR services.

FAQ

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