VAT Effect on Businesses in Saudi Arabia

VAT Saudi Arabia 2025: Latest ZATCA Updates & Compliance Guide

In today’s fast-changing tax landscape, staying compliant with Saudi Arabia’s VAT regulations is essential for any business. With the Zakat, Tax, and Customs Authority (ZATCA) issuing new amendments in 2025, this guide explores the latest updates and how your business can stay ahead.

What is VAT in Saudi Arabia?

Value Added Tax (VAT) is an indirect tax applied to the sale of goods and services in the Kingdom of Saudi Arabia (KSA). Introduced in 2018 at a 5% rate, VAT was increased to 15% in July 2020. ZATCA governs the implementation, enforcement, and compliance of VAT in the country.

ZATCA VAT Amendments in 2025

Effective 18 April 2025, ZATCA introduced multiple changes to strengthen compliance and simplify VAT reporting:

• New VAT Grouping Rules: Businesses under the same economic activity can form VAT groups. Companies have 180 days from April 18 to comply.
• Deemed Supply Provisions Expanded: Transfers of goods/services under economic unity are now deemed supplies.
• Reverse Charge for Marketplaces: Online marketplaces are now deemed suppliers and must collect VAT on behalf of sellers. This rule becomes mandatory by 1 January 2026.
• Going Concern Transfers: Enhanced clarity on transfers of economic activities without VAT.

VAT Refund for Tourists

ZATCA’s tourist VAT refund program aligns with Vision 2030, allowing eligible tourists to reclaim VAT paid on purchases at authorized retailers and airports. This promotes tourism and economic inflow while complying with global tax standards.

E-Invoicing Integration

ZATCA continues enforcing e-invoicing (FATOORA) phases. Businesses must:

• Issue compliant XML-format invoices
• Integrate with ZATCA’s system for real-time reporting
• Store and archive e-invoices securely

This requirement aligns with the Kingdom’s digital transformation strategy.

VAT in Saudi Arabia for E-Commerce Businesses

With the rise of digital transactions, ZATCA now enforces VAT collection through online marketplaces, which must:

• Register for VAT
• Collect and remit VAT on behalf of sellers
• Maintain clear transaction records

This boosts transparency and ensures tax collection from global platforms.

How ERP Systems Help with VAT Compliance

A modern ERP system like Tranquil ensures full VAT compliance:

• Automatic VAT calculation
• Real-time invoice generation
• E-invoicing integration (ZATCA-compliant)
• Accurate tax reporting

Tranquil’s ERP software is designed to support Saudi accounting standards, including ZATCA, VAT, and e-invoicing regulations.

Key VAT Compliance Dates

• 18 April 2025: VAT amendments take effect
• 15 October 2025: VAT grouping compliance deadline
• 1 January 2026: Online marketplaces treated as deemed suppliers

FAQs

Q1: What is the VAT rate in Saudi Arabia in 2025?
A: The VAT rate remains 15% as of 2025.

Q2: Are online sellers responsible for VAT?
A: If selling via a marketplace, the platform is responsible under reverse charge rules starting Jan 2026.

Q3: Who is eligible for tourist VAT refunds?
A: International visitors purchasing from ZATCA-authorized stores.

Q4: How can Tranquil ERP help with VAT?
A: Tranquil automates VAT calculation, integrates with ZATCA, and supports e-invoicing.

Conclusion

The 2025 VAT updates reflect Saudi Arabia’s ongoing push for digital transformation and tax transparency. By staying updated with ZATCA’s regulations and using a compliant ERP system like Tranquil, your business can navigate tax obligations efficiently and avoid penalties.