Understanding Saudi Arabia’s tax landscape can be complex, particularly for businesses determining their obligations under VAT or Zakat. Our goal is to clarify the criteria that differentiate Zakat from Corporate Tax, providing businesses with clear guidance for operating within the Kingdom.
Zakat and VAT
The government collects Zakat, a mandatory Islamic charitable contribution in Saudi Arabia, to support the less privileged. A consumption tax applied to the value added at every manufacturing and distribution stage is called a value-added tax, or VAT. Businesses collect and remit VAT, contributing to government revenue. Introduced in January 2018 at a 5% rate on taxable supplies and imports, aids government revenue through business collection. From May 11, 2020, a decree from the Zakat, Tax, and Customs Authority raised the VAT rate to 15% starting July 1, 2020.
Registration with Zakat
Zakat is subject to any activity intended to earn money or work, so once registered with the Ministry of Commerce, TIN is created for the business. Once established, you must log in to the Zakat, Tax, and Customs Authority portal to complete the initial registration for Zakat services.
Process
Access the Ministry of Commerce Registration portal and sign in to register for Zakat and CIT. Then, log into the ZATCA Portal and navigate to the “Zakat” tab to complete the registration process.
Corporations must meet the following criteria to be eligible for Zakat:
- Zakat eligibility is based upon specific criteria and is only for exclusive ownership by Saudi for GCC nationals.
- The business must be a legal entity, encompassing structures like joint stock companies, limited liability companies, or partnerships.
Steps to acquire VAT certificate in KSA
To register for your VAT Certificate with ZATCA, access their portal, navigate the relevant services, and complete the registration. You’ll receive your VAT Certificate upon approval.
Categorized goods that incur no VAT, with a tax rate of 0%.
In Saudi Arabia, the following goods are categorized with a tax rate of 0% VAT:
Supplies eligible for a 0% VAT rate in the Kingdom of Saudi Arabia (KSA) are those for which the supplier is VAT registered. The following categories qualify for this rate:
- Exported Goods: Goods intended for delivery outside the KSA.
- Services supplied to Non-GCC Residents: Services provided to individuals or entities outside the Gulf Cooperation Council (GCC) region.
- Supply of Qualifying Means of Transport: The provision of eligible transportation methods.
- International Goods and Passenger Transport Services: Involves the movement of goods and passengers across international borders (In Saudi Arabia, international transportation of passengers is subject to a zero VAT rate).
- First Supply or Supply for Investment of Qualifying Metals: Initial transactions or transactions related to investment involving gold, silver, or platinum.
- Qualifying Medicines and Qualifying Medical Goods: Certain medicines and medical goods qualify for zero-rated VAT, reducing their cost by exempting them from VAT.
A 15% value-added tax applies to all goods and services except exempt supplies and those classified as zero-rated supplies.
Office # 28, 1st floor,
Raden Commercial center,
Al muruj, Olaya street,
Riyadh 12281, Saudi Arabia
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Office # 28, 1st floor,
Raden Commercial center,
Al muruj, Olaya street,
Riyadh 12281, Saudi Arabia
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