Value Added Tax (or VAT) is an indirect tax imposed on all goods and services that are bought and sold by businesses, with a few exceptions. VAT is applied in more than 160 countries around the world as a reliable source of revenue for state budgets.
VAT is imposed at each stage of the supply chain from the production and distribution to the final sale of the good or service
The consumer pays the VAT cost on purchased goods and services. Businesses pay the government the VAT collected from their customers’ purchases and refund the VAT they paid to their suppliers.
In June 2016, the GCC countries agreed to impose VAT across the GCC region. In February 2017 (Jumada Al-Awwal 1438), Saudi Arabia ratified the
GCC VAT framework and committed to impose VAT with effect from January 1, 2018 (Rabi Al-Thani 14, 1439). VAT will be introduced at a standard rate of 5%.
The General Authority of Zakat and Tax (GAZT) is responsible for managing the implementation, administration and enforcement of VAT in Saudi Arabia. It does so in close coordination with other relevant entities.