VAT registration in Saudi Arabia: who must register, and how

A business must register for VAT when its annual taxable supplies go above SAR 375,000. Below that line registration is not compulsory, but a business whose annual taxable supplies reach SAR 187,500 may register voluntarily. In practice, a small cafe or trading shop that has crossed the higher figure registers, while a young business between the two decides whether registering helps it.

Voluntary registration is more than a courtesy. Once registered, you charge VAT and file returns like any other registered business, and you can deduct the VAT you paid on purchases. You can also issue tax invoices, which business customers expect. The price is more paperwork, so weigh it against how many of your customers can reclaim VAT themselves.

Supply is the tax word for what you sell: goods handed over and services performed. Taxable supplies are the sales that VAT applies to. Add up their value across a year and you have the figure that is compared with SAR 187,500 and SAR 375,000. It measures sales, not profit, so your costs do not bring it down.

Count every channel together. A cafe adds its till sales to its invoices to companies, and a contractor adds every stage invoice from every project. Look at the running total each month rather than waiting for year end, because a business near the line needs time to register. Ask your accountant how zero-rated and exempt sales are counted.

Once you are registered, ZATCA gives your business a VAT registration number. It has 15 digits, and it starts and ends with 3. Think of it as your tax identity: customers, suppliers and the Authority all use it to recognise you, and it stays with you on every invoice and every return, so copy it carefully and check it twice before it is printed on anything.

The number must appear on the tax invoices and simplified tax invoices you issue. On a simplified invoice it is also encoded in the QR code, together with the seller name, the timestamp, the invoice total with VAT and the VAT amount. A business customer relies on a correct invoice, including your number, when claiming VAT back, so one wrong digit hurts you both.

From registration, your sales are no longer plain sales. Taxable sales carry VAT at 15%, unless a supply is zero-rated, such as an export of goods, or exempt. The VAT you collect belongs to the state, not to your business, so keep it visible on every invoice and away from your day-to-day spending.

Registration also brings you under the e-invoicing rules and starts a rhythm of paperwork. Someone must own it, whether that is you, a bookkeeper or an outside accountant. The list below shows the habits that begin on day one. Set them up before your first return, not after.

• Charge 15% VAT on taxable sales and show it on every invoice
• Issue invoices electronically, as the e-invoicing rules require
• Keep invoices and tax records, generally six years, and confirm your case with your accountant
• Collect supplier tax invoices, since purchase VAT is claimed with them
• File a VAT return for each tax period

Do not leave registration to the month you cross the line. Register early enough that your invoices, prices and software are ready when your obligation starts. Missing the deadline can carry penalties. The exact amounts and dates are set by ZATCA and can change, so read them on its website or ask your accountant rather than relying on hearsay.

The business itself registers with ZATCA, and Fatooraz cannot do it for you. Before you start, gather what the registration form asks for, which depends on your type of business, and a tidy summary of your sales showing how you reached the threshold. Also decide who will receive messages from the Authority, and make sure the contact details on record are correct.

• A sales summary for the last twelve months, month by month
• Business details and contacts, as the form requires
• A named person for invoices, records and returns
• A start date from which invoices and prices show VAT

The two go together. Your VAT registration number is the identity printed on every invoice and stored in its QR code, and the e-invoicing rules decide how those invoices are created, stored and, in Phase 2, sent to ZATCA. Phase 1 has applied since 4 December 2021: invoices are issued and stored electronically, with a QR code on simplified invoices.

Phase 2 connects your system to the Fatoora platform in waves of taxpayers that ZATCA selects and announces, so follow its announcements for your own wave. Fatooraz supports Phase 1 and Phase 2, and its free trial runs in ZATCA's simulation environment, a safe place to practise. Onboarding with ZATCA stays your step, and Fatooraz guides you. Thresholds and procedures can change, so confirm current figures with ZATCA or your accountant.