How to register for VAT in KSA?

Value Added Tax (VAT) in Saudi Arabia was instituted on January 1, 2018, after the establishment of Vision 2030 to back its goals of diversifying the economy. The initial rate was set at only 5% to not overburden the taxpayers; however, the rate tripled to 15% after the consequences of Pandemic 19 in July 2020. This evolution also showed the Kingdom’s commitment to work on a non-oil government revenue and build a resilient and border economy.

For any company, be it local or international operating in KSA, it is a must to understand the VAT legislation fully to stay sound legally. The key body to look after the VAT matters in Saudi Arabia is the Zakat, tax, and customs authority (ZATCA). VAT registration is a critical step of this entire VAT compliance process; it is a legal requirement for businesses whose taxable supplies go beyond the taxable threshold. Businesses that fail to register are exposed to strict legal consequences; hence, a clear, step-by-step approach is crucial for the VAT registration process. This complete guide will help you understand every part of VAT registration in Saudi Arabia.

Who Needs to Pay VAT in KSA?

Registration of Value Added Tax is either Mandatory, Voluntary, or exempt and depends on the business activities and its turnover.

1.     Mandatory Registration

VAT registration is legally mandated for businesses whose taxable supplies in the last 12 months are above the threshold, which is SAR 375,000. Even if it is expected that the taxable supplies will hit the threshold, they should still register for VAT. A service provider generating SAR 400,000 on an annual basis is obliged to register.

2.     Voluntary Registration

Many businesses prefer voluntary registration even if they don’t fall under the taxable threshold, as this benefits them in claiming tax credits, gaining the trust of authorities, and boosting their reputation. SMEs with annual taxable supplies exceeding SAR 187,500 and below SAR 375,000 can voluntarily register

3.     Exempt Businesses

Some of the businesses are not eligible to register for VAT in Saudi Arabia, like financial services and residential rental activities. These businesses can still comply with the reporting obligations.

4.     Non-Resident Businesses

Non-Saudi/Foreign Companies with taxable supplies must also fully register for VAT, even if they don’t physically operate in the Kingdom; they can proceed by hiring a tax representative.

Pre-Registration Readiness with Essential Prerequisites

Prior to initiating the process of registration, it is important to ensure that you have done your homework and gathered all the required documentation and financial prerequisites.

ZATCA Account and TIN

The complete process of VAT registration in KSA is looked after by ZATCA and done through ZATCA’s e-portal. Registration on the ZATCA portal requires a TIN, which can be obtained by registering with the Ministry of Commerce, and individuals and non-commercial businesses can get it from ZATCA’s portal through an initial setup. This TIN is then used to set up a dedicated account on ZATCA with secure credentials that give access to all the tax-related digital services.

Gathering Required Documentation

All the essential paperwork must be done before beginning the registration process; it not only saves time but also avoids any trouble with missing data. The core supporting documents include:

• Commercial Registration Certificate (CR)
• National ID or Iqama for a non-resident business owner
• Tax Identification Number (TIN)
• Articles of Association (AOA)
• Details of Bank Accounts (IBAN)
• Financial statements or Projected Revenues
• Invoices and contracts with all the information on taxable supplies
• Import and export data if available

With complete documentation, the business makes sure the process is completed accurately and stays protected from delays and unexpected errors.

The Step-by-Step VAT Registration Process on the ZATCA Portal

The complete process of VAT registration is performed by the ZATCA e-portal. Although the process is simple, it demands attention to detail with no minor gaps.

Step 1: Log in and access the VAT Registration Service

• Go to the ZATCA’s official webpage, which is zatca.gov.sa
• By using your credentials, log in to your account, and you may receive an OTP on your registered mobile number for security purposes.
• Move to the services section from the main dashboard
• Select the VAT registration option titled “Registration for VAT”

Step 2: Completing the Application Form – Taxpayer Details

Once you get the application form, it will be divided into different sections to gather every essential detail of a business, including,

• Most of the time, essential information like TIN, CR, and addresses is filled automatically through the ZATCA cloud portal. It is important to verify that all the data is accurate.
• Confirm and update all the official email details, mobile numbers, and mailing addresses.
• Mention the details of the primary person for contact regarding tax matters, and also make sure that their information is precise.

Step 3: Providing Financial and Taxable Activity Details

The most critical part of this entire process of application submission is to establish your eligibility.

• Add the right details of the date on which your business exceeded the mandatory VAT threshold, or if you are choosing voluntary registration, pick the date of starting. You will then be given your date of VAT registration.
• You must submit details of figures for a 12-month period, which ZATCA will use to verify your threshold compliance. These details include your actual taxable supplies, expected taxable supplies, and your taxable expenses in the last 12 months
• Mention your economic activities and describe the percentage of your supplies, like standard, zero-rated, and exempt supplies
• Enter all the essential bank details, like the official IBAN for the VAT refund process.

Step 4: Submission, Review, and Confirmation

• Add additional supporting documents like financial statements or a CR certificate. Uploading the documents that support your turnover amount is also recommended
• The authorized signatory must make sure that all the information collected is precise and check all the legal requirements to see if they are fulfilled completely.
• Now is the time to submit the form by clicking the submit button, and you will get an application reference number.

Post-Submission and Approval

Once the taxpayer applies, it moves to the review process of ZATCA, which typically takes a few working days, depending on the complexity of the submitted application, and may request additional documents. ZATCA contacts the company or individual through the email provided or through the online portals in case of any queries or further documentation requirements. By promptly responding to queries, businesses can avoid delays in the process of registration.

Once ZATCA approves the application, it offers an official VAT certificate. This certificate has 15 digital VAT identification numbers (VATIN) with a unique identity of business for tax submission. This certificate also ensures the effective date of when registration started. Companies must display this VATIN in all of their official tax documents and invoices as a verification of VAT compliance.

Compliance Obligations Post-Registration

Although the most essential steps are completed, it is the start of a new journey; registered businesses have to keep complying with the latest regulations and file returns accurately regularly. A few things to keep in mind post VAT registration are mentioned below:

1. Charging and Accounting for VAT: The businesses must charge a standard 15% VAT on the taxable goods and services that are utilized within KSA, unless the supply is zero-rated or exempt. Businesses can recover the VAT paid on purchases that are related to business
2. VAT Return Filing: Businesses are required to submit their VAT returns to ZATCA on a routine basis, and the frequency of filing taxes depends on taxable annual supplies, which can be quarterly, monthly, or yearly.
3. Compliance with E-Invoicing: Compliance with Fatoorah, the legal e-invoicing system regulations, is a phased implementation that all the registered businesses must integrate into their systems to operate without legal troubles.
4. Record Keeping: Businesses must maintain an accurate and complete record of each transaction for at least the last 6 years. It must have tax invoices, credit notes, debit notes, financial records, and VAT returns; these records must always be available to present in front of the tax authorities from ZATCA.

Penalties for Non-Compliance

If any business fails to register for VAT on time, files their returns inaccurately, or miscomputes calculations, they are exposed to strict actions from ZATCA for non-compliance. Such as,

• Not Registering on Time: Fine ranging from SAR 10,000 to SAR 50,000
• Not Issuing Valid Tax Invoice: Fine of 50% of transactional Value
• Late VAT Return Filing: Fine of 5% to 5% of the remaining tax
• Tax Evasion or Misstatement: Strict Penalties with heavy fines up to 100% and even imprisonment in some cases

Stopping Penalties Before They Start

Don’t panic about the ZATCA fines, because SSCOKSA is here for you! In the highly compliant and regulated KSA legal framework, non-compliance isn’t a risk but a guaranteed cost. With SS&CO by your side, we don’t just process paperwork, but we create a secure and unbreakable defense system for your company. From taking care of transactions in real time to assuring timely and accurate filing, we make certain that your business is always legally sound to operate in KSA. Being one of the greatest accounting firms in KSA, we know what it takes to turn your complex tax regulations into an advantage, so you can competitively operate in the Kingdom.