Business Taxes in Saudi Arabia: VAT, Zakat Explained

Businesses operating in Saudi Arabia are subject to three main levies overseen by the Zakat, Tax and Customs Authority (ZATCA): value added tax (VAT), Zakat and corporate income tax. All registration, filing and payment steps run through the ZATCA electronic portal, which is separate from platforms such as Absher, Qiwa, Muqeem and Najiz.

The standard VAT rate remains 15% on most goods and services supplied in the Kingdom, unchanged since 1 July 2020 and still in force in 2026. Businesses whose annual taxable supplies reach SAR 375,000 or more must register for VAT, while those reaching SAR 187,500 may register voluntarily. Both resident companies above the threshold and non-resident businesses making taxable supplies in the Kingdom (through a tax representative) are required to register.

Filing and returns

Filing frequency depends on turnover: companies with annual taxable supplies above SAR 40 million file monthly, while those at or below that level file quarterly. VAT returns and payments are generally due by the end of the month following the tax period, and late filing carries penalties based on a percentage of the VAT due and/or fixed amounts.

Registered businesses can deduct input VAT on eligible purchases from their output VAT. However, some items are not recoverable, including certain entertainment expenses, passenger cars not used exclusively for business, and personal expenses.

Zakat rates

Zakat is charged at 2.5% of the Zakat base for entities using the Hijri year, or 2.5778% for those following the Gregorian calendar. Payments are made electronically through SADAD or bank transfer using the reference number provided by ZATCA.

For the Kingdom's large expat business community, understanding these obligations is essential. Companies must create a ZATCA online account using their commercial registration details, obtain a VAT certificate, and configure invoicing systems to issue compliant e-invoices, with Phases 1 and 2 of e-invoicing already implemented.

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