Who Needs to Register for VAT in KSA?

If you run a business in Saudi Arabia, you need to know about the Value Added Tax (VAT) if you want to keep your business compliant and operations running smoothly. VAT in KSA is introduced as a part of government Vision 2030 initiative to diversify the economy and streamline tax systems. Yet, who exactly in Saudi Arabia needs to register for VAT remains the question.

The KSA VAT registration rules are straightforward All businesses with annual taxable turnover exceeding the mandatory threshold i.e. SAR 375,000 are required to register. For voluntary registration, businesses with turnover between SAR 187,500 and SAR 375,000 can choose. But if you are looking into VAT registration in KSA for the first time, or are struggling with compliance, you should know about these thresholds and requirements. In this blog, we’ll discuss all the things you need to know about VAT registration, including the types of VAT registration, E-invoicing in Riyadh the procedures and deregistration guidelines so that your business is kept VAT compliant.

Mandatory VAT Registration in KSA

Businesses and individuals in Saudi Arabia must register for VAT within 30 days of meeting the following conditions:

1. The Taxpayer is a resident of KSA.

To be registered for mandatory VAT, any business or individual conducting taxable activities must be a resident of Saudi Arabia. It guarantees that local businesses obey the tax laws of Zakat, Tax and Customs Authority (ZATCA).

2. The Total Value of Taxable Supplies Exceeds SAR 375,000

This condition applies to businesses whose taxable supplies:

• Exceed SAR 375,000 in the Previous 12 Months: If your annual taxable turnover is already over this threshold you will need to register for VAT within 30 days.
• Will Exceed SAR 375,000 in the Coming 12 Months: If you are likely to exceed the taxable supplies threshold in the next year, you have to register for VAT.

If you fail to follow these rules, you can incur penalties so it’s important to keep up with KSA VAT registration requirements.

Voluntary VAT Registration in KSA

The Zakat, Tax and Customs Authority (ZATCA) allows businesses and individuals to register for VAT voluntarily under the following conditions:

1.The Taxpayer is a KSA Resident.

In order to be able to register voluntarily in Register for VAT in Saudi Arabia, the business or person should be a resident of KSA. This is to ensure the taxpayer is eligible to participate in VAT system of the Kingdom.

2.The Total Taxable Supplies or Expenditures exceed SAR 187,500.

Businesses can opt for voluntary VAT registration if they meet either of these criteria:

• Taxable Supplies Made: The total value of taxable supplies in the previous 12 months exceeds SAR 187,500. It covers sales of goods and services subject to VAT.
• Expenditures Incurred: Alternatively, if total business expenditures in the last 12 months exceed SAR 187,500, the taxpayer is entitled to voluntary registration. This allows a business to claim VAT input tax on eligible expenses.

For small businesses and startups, voluntary VAT registration is a very good move because it improves cash flow by allowing VAT recovery on expenses.

KSA VAT Registration in Special Cases

VAT registration in Saudi Arabia also includes standard rules plus some cases for non-residents, VAT groups and exemptions. Let’s explore these special cases in detail:

1. Non-Residents

The Non-residents who engage in taxable activities in KSA must register for VAT under certain conditions:

• The Non-residents must register for VAT if they supply goods or services to non-registered individuals or entities in KSA and their first taxable transaction occurs on or after 1 January 2018.
• To guarantee compliance, non KSA residents are advised to appoint a Tax Representative in KSA. This is a representative approved by ZATCA, who registers VAT, collects VAT from customers, and pays the required payments to the authority.

The end result of this system is that non-resident businesses receive the same level of compliance with respect to KSA VAT rules that resident businesses have.

2. VAT Group Registration

Under the ZATCA guidelines, businesses with common ownership in KSA can choose to register for VAT group. Here’s how it works:

• A VAT group can be formed by legal entities where one or more members have at least 50% stake in other.
• The common control exercised by the group must be shared by an individual or an organization. The group does not have to include the controlling party.
• To at least one group member, the VAT registration threshold must be reached independently by the group member through taxable supplies.

When approved, ZATCA will issue a single Tax Identification Number (TIN) to the group that simplifies VAT compliance and cuts down on administrative burdens for related businesses.

3. Multiple Commercial Registrations

If your business has branches or commercial registrations within KSA or abroad, you will be issued only one VAT registration number. Here’s how it works:

• For VAT purposes, the main branch or primary commercial registration is used.
• In the case of businesses with fixed establishments in many countries, VAT payments and collections are made in the country with the closest connection to each transaction.
• KSA exempts VAT on inter branch transfers within the same entity, leaving no financial burden for interior transfer of goods among different departments within the same entity.

The review is fast and economical, and helps businesses meet with VAT obligations across disparate operations.

4. Exemption from VAT Registration in KSA

KSA exempts from VAT registration taxpayers whose activities are limited to the zero rated supplies even when they exceed the mandatory registration threshold.

• These are goods or services taxed at 0% (zero rated supplies), including exports and certain industries, such as healthcare and education.
• Businesses claiming exemption must keep sufficient evidence, such as invoices and records, to show that they only make zero rated supplies.

This exemption ensures that businesses working in certain sectors do not get themselves clogged with unnecessary taxes while proceeding successfully, enhancing the work of those at the bottom while maintaining growth clarity on the part of the taxpayers.

VAT Registration in KSA

KSA taxpayers can register for VAT through ZATCA e services portal. If you do not have a valid Tax Identification Number (TIN) you must first apply for one before you are able to register for VAT. Here are the steps:

1. Step 1: Read Instructions

The VAT registration process starts with an instructions page on the ZATCA portal. This page is a detailed guide for completing the application and what information is needed. If you’re a taxpayer, you should read these instructions carefully in order to prevent errors or delays with the registration process. These guidelines will help you understand what to look for and enables you to gather all the information you need before applying.

2. Step 2: Fill in the Taxpayer’s Details

Basic details like TIN, commercial registrations and address are auto populated by the ZATCA portal. Taxpayers will then need to provide additional information, such as:

• Importers or exporters of goods or services.
• An IBAN associated with the applicant’s VAT account.
• The date they became eligible for VAT registration.

This information needs to be accurate at this stage so you would comply with ZATCA’s requirements and not risk losing your application.

3. Step 3: Fill in the Financial Details

On the third page, taxpayers must provide financial data to verify their VAT eligibility, including:

• Expected taxable sales for the next 12 months.
• Actual taxable sales for the previous 12 months.
• Expected taxable expenses for the next 12 months.
• Actual taxable expenses for the previous 12 months.

These figures can be supported by relevant documentation attached to the application. In this way, ZATCA has data to process the VAT registration accurately.

4. Step 4: Financial Representative Details (for Non-Residents)

Non-KSA residents must provide details of their tax representative, including:

• TIN (if available).
• ID number (Saudi, Iqama, or GCC ID).
• Mobile number and email.

The non-resident is represented by the tax representative, who acts on his behalf to comply with VAT. This gives ZATCA the ability to identify and communicate with the representative.

5. Step 5: Provide a Declaration

Finally, on the last page, applicants are required to declare the information they have provided is true. They have to enter their name, ID number and title under the organization. This step is to confirm that the taxpayer is accountable and it completes the VAT registration process. The declaration is accurate so that the application is processed without any delay.

VAT Deregistration in KSA

Rules governing VAT deregistration in Saudi Arabia are set by the VAT General Guide. To stay compliant when your circumstances change, businesses need to know these guidelines.

1. Mandatory Deregistration

Taxpayers must apply for VAT deregistration within 30 days if any of the following occurs:

• Economic activities cease for the taxpayer entirely.
• The taxable supplies stop.
• Taxable supplies are less than the voluntary registration threshold of SAR 187,500.

But businesses that have been registered for VAT for less than 12 months are not eligible to deregister. After submitting an application, ZATCA will review and confirm the date of deregistration. This means that businesses are only registered if they need to comply with VAT.

2. Voluntary Deregistration

Taxpayers registered voluntarily can apply for VAT deregistration if:

• They have been VAT registered for at least 12 months.
• They have fallen below the mandatory threshold of SAR 375,000 in their annual taxable turnover.

To avoid unnecessary compliance, businesses need to regularly review their eligibility for VAT registration. Deregistration makes operations easier for businesses that no longer satisfy the conditions, but they adhere to KSA VAT regulations.

Conclusion:

Compliance with ZATCA’s regulations requires deregistering and Register for VAT in Saudi Arabia. If you apply for mandatory or voluntary VAT registration, it is important that you fulfill certain criterion and present accurate information when required. Likewise, knowing the conditions for VAT deregistration allows businesses to avoid penalties they don’t need and make their taxes easier. Knowing about VAT registration in Saudi Arabia is important to businesses to run smooth and grow without tax related hurdles.

For a KSA business owner, regular evaluation of your taxable turnover and economic activities is necessary to determine your VAT compliance needs. They have to follow the right guidelines whether it’s to register for VAT or deregister when it’s applicable. Learn more about KSA VAT registration, VAT in KSA, e-invoicing in Saudi Arabia benefits from ZATCA’s resources, avail professional help to stay compliant with KSA VAT laws.