VAT Thresholds and E-Invoicing Rules in Saudi Arabia

Businesses across Saudi Arabia are reminded of the current rules governing value-added tax (VAT) registration and the ongoing rollout of the Kingdom's e-invoicing system, with a new compliance wave now reaching smaller enterprises.

VAT registration becomes mandatory once a business records SAR 375,000 or more in annual taxable supplies over any 12 consecutive months. Companies below that level may register voluntarily once their taxable supplies or taxable expenses reach SAR 187,500. Foreign and non-resident businesses face no threshold at all and must register from their very first taxable supply in the Kingdom. The standard VAT rate remains 15%.

E-invoicing moves to smaller businesses

The e-invoicing programme has two stages. Phase 1 has been live since 4 December 2021 and applies to all VAT-registered taxpayers except non-residents. Phase 2 introduces a rolling integration with the Fatoora platform, carried out in waves, requiring taxpayers to connect their invoicing systems to ZATCA for clearance and reporting.

In 2026, the latest Phase 2 wave lowered the revenue threshold to SAR 187,500 in annual VAT-subject revenue, moving the requirement down into the voluntary-registration band and below the mandatory VAT threshold. Businesses in this wave have an integration deadline of 1 February 2027.

Why it matters: the change means many small and medium-sized businesses that were previously outside the integration requirement now need to prepare their systems to link with ZATCA. Registration and thresholds are assessed on a 12-month taxable-supplies basis, and all VAT and e-invoicing services are handled through ZATCA online channels and the Fatoora platform.

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