The Gulf state of Saudi Arabia implemented VAT on electronic or digital services provided by resident or non-resident providers on 1 January 2018. This was the date it introduced its 5% VAT regime as part of the six-state Gulf Cooperation Council agreement to create a VAT union. So far, only UAE, Saudi Arabia, Bahrain and Oman have introduced VAT and taxed non-resident digital services.
This requires a VAT registration with the General Authority of Zakat and Tax to charge VAT to consumers. There is no VAT registration threshold. Business customers are zero-rated with the reverse charge. Check VAT Calc’s global VAT and GST on digital services tracker to see which other countries have introduced indirect taxes on electronic services to consumers.
What digital services are liable to Saudi Arabian VAT?
Income from the following services is subject to VAT:
- SaaS or cloud-based software
- Streaming or download software
- Online storage
- e-commerce booking services would be subject VAT based on the underlying supply
- ride sharing platforms will be deemed to be providing transport services
Determining if VAT is due
Under the destination principle, VAT is due if the digital services is consumed in Saudi Arabia. This would include via the internet, WiFi, hotspot etc. Providers may determine the location of the location of their customer and/or where the services is consumed by using any of the following evidence:
- Customer invoicing address
- Bank account details of the customer
- IP internet protocol address used by the customer to receive the electronic services
- Country code of the SIM card used by the customer to receive the electronic services
There is no Saudi Arabia VAT registration threshold for non-residents providing A special VAT agent, or Fiscal Representative, is not required for non-residents to register and file their returns.
B2B digital VAT rules – reverse charge
Foreign providers with businesses customers do not charge Saudi Arabian VAT. Instead, they should zero-rate the transaction and allow their customer to report the transaction via the reverse charge. If a provider only has business customers, then there is no requirement to VAT register.
Saudi Arabia also makes facilitating marketplaces liable for the VAT on their third-party sellers.
Africa & Middle East VAT on digital services
|Comments (click for details)||Rate||Date||Threshold||Comments|
|Cameroon||19.5%||Jan 2020||XAF 50 million|
|Egypt||14%||Sep 2016||EGP 500,000|
|Ghana||12.5%||Apr 2022||GHS 200,000|
|Kenya||16%||Sep 2013||-||Registration threshold removed 2023|
|Oman||5%||Apr 2021||OMR 35,000|
|Saudi Arabia||15%||Jan 2018||Nil|
|Senegal||18%||Jan 2023||Nil||Fiscal representative required|
|Sierra Leone||15%||SLE 100,000|
|South Africa||15%||Jun 2014||ZAR 1 million|
|Tanzania||18%||Jul 2022||Nil||Residents since Jul 2015|
|Tunisia||19%||Jan 2020||Nil||Withholding VAT; 3% Royalty Tax|
|Uganda||18%||Jan 2020||UGX 150m|
|United Arab Emirates||5%||Jan 2018||AED 375,000|