VAT rates for goods and services in Saudi Arabia - FAQs

What are the different types of supply?

There are two types of supplies of goods and services in Saudi Arabia: taxable and non-taxable supplies. Taxable supplies can be further classified into zero-rated and standard-rated supplies. Every supply of goods and services bought, sold, or imported into Saudi Arabia is considered taxable unless specifically mentioned otherwise. 

What is an exempt supply?

Exempt supplies are those for which VAT does not apply. Businesses that supply exempt goods and services are not eligible to collect VAT during sales, cannot deduct input VAT paid to their suppliers, and are not allowed to register for VAT.

What is a zero-rated supply?

A supply of goods and services is called zero-rated when it is legally taxable, but only taxed at 0%. Although this sounds very similar to an exempt supply, there is one major difference: businesses supplying zero-rated supplies can deduct their input VAT and claim refunds for the tax paid for purchases, whereas businesses supplying exempt supplies cannot.Examples of zero-rated supplies include: exports made to non-GCC countries, international transportation services, sale of investment metals, and medicines and medical supplies.

What is a standard-rated supply?

A supply that is neither exempt nor zero-rated is classified as a standard-rated supply. These goods and services are subjected to 5% tax. Examples of standard-rated supply include: food and beverages, private healthcare, private educational services, local transportation, rent and sale of commercial buildings, and sale of residential buildings. 

What is an out-of-scope supply?

Out-of-scope supplies are those supplies that are exchanged between an overseas or unregistered supplier and an overseas buyer. VAT is not applicable to such scenarios.

There are three situations when a supply is classified as out-of-scope: 

• The supply is made by a non-taxable person.

• The supply is made outside of KSA.

• The supply is for another department within one business, or for an event with no economic benefit.

When is an imported supply considered taxable?

Both registered and unregistered businesses are required to pay VAT on imports in the following situations:

• When a registered business is importing goods from a non-GCC country (or a country within GCC, if they cannot prove that they have already paid VAT), then the business is liable to pay VAT to the customs department once the supply has reached KSA.

• When an unregistered business is importing goods from another GCC country that are worth more than 10,000 SAR, and they cannot prove that they have already paid VAT for the supply, then the business is liable to pay VAT to the customs department.

When is an imported supply considered non-taxable?

The following imported supplies are exempted from VAT:

• Goods for diplomatic and military use

• Imports of personal effects and household appliances that are moved into KSA

• Imports of returned goods

• Low-value imports of personal items and gifts that are carried in travelers’ personal luggage