Overview

VAT was introduced across the Saudi Arabia on the January 1, 2018 at a rate of 5 percent on most goods and services, although there are some exceptions. For further information, visit the Federal Tax Authority website.

There are no specific directives or prescribed charts of accounts nor rule or regulation regarding sequential numbering, etc. However, to truly use Sage X3 Saudi Arabian legislation, a ready-to-use configuration and settings are delivered. You are free to adopt, take example from, or redesign them entirely accordingly your needs and in accordance with the design principles of tax handling in Sage X3.

The assigned localization code for the Saudi Arabia is SAU. The related activity code is KSA.

VAT principles

In each step of the value chain, buyers pay the tax on purchased goods and services. Sellers collect the tax on sold goods and services. 

• Businesses pay the government the VAT collected from their customers’ purchases and calculate the VAT they paid to their suppliers.
• At the end, the final consumer pays the entire VAT.

There are usually several exceptions or derogatory regimes depending on the sector, the type of goods or services, or the size of the business.

The VAT is calculated by applying a percentage, depending on the type of goods or services, to the net price. Declarations usually split the different amounts, basis (tax excl. amount) and VAT (tax amount). Zero-rate transactions must be identified versus non-subjected transactions. This is the case when exporting goods or services. Typically, the authorities want to ease international sales so that they are taxable at zero rate.

Certain rules can complicate VAT management:

• VAT can be calculated and paid even if the goods or the services are not purchased. This is the case for self-supplies, for example, in some regulations.
• VAT on purchased goods and services can be not fully deductible.
• Certain events, like the invoice, and certain situations like different legislative contexts or paying an invoice, can trigger a VAT payment or deduction.

Important considerations

VAT rules depend on the characteristics of the seller, the purchaser, and the type of goods or services. The VAT implementation requires complete and accurate information at these different levels.

• VAT management primarily relates to purchasing and sales transactions.
  • The invoice layouts must display all the VAT information including identification of parties.
  • VAT must be determined and calculated in these transactions.
• All the tax information must be present in the accounting system, which must be used to extract, calculate, and validate the VAT declaration.