Mandatory VAT registration in Saudi Arabia applies to every resident person whose annual value of taxable supplies exceeds the Mandatory Registration Threshold of SAR 375,000, while the Law also allows voluntary registration for those whose supplies or expenses reach SAR 187,500, i.e. half of the mandatory threshold.
The Mandatory Registration Threshold
The Unified VAT Agreement of the GCC states provides that a Taxable Person is obliged to register if he is resident in a Member State and the value of his annual supplies in that State exceeds, or is expected to exceed, the Mandatory Registration Threshold, which the Agreement sets at SAR 375,000 or its equivalent in the GCC states' currencies.
Under the Implementing Regulations of the VAT Law, every Resident Person in the Kingdom who is not registered with the Authority must, at the end of each month, calculate the value of his supplies made in the preceding twelve months; if this value exceeds the Mandatory Registration Threshold, he must apply to the Authority for registration within thirty (30) days of the end of that month. The same obligation applies to a person whose supplies are expected to exceed this threshold within the following twelve months.
The Voluntary Registration Threshold
The Unified VAT Agreement allows a resident person who is not required to register under the mandatory rule to request registration in the Member State, provided the value of his annual supplies there is not less than the Voluntary Registration Threshold, and it expressly states that the Voluntary Registration Threshold is 50% of the Mandatory Registration Threshold, i.e. SAR 187,500. A Member State may also allow voluntary registration where the annual expenses of a person not obliged to register exceed this same threshold.
Special Cases
- A nonresident person obliged to pay Tax in the Kingdom must register regardless of the size of his business.
- A person who makes only zero-rated supplies is excluded from the mandatory registration requirement even if the value of those supplies exceeds the Mandatory Registration Threshold, and may elect to register voluntarily.
- Under the VAT Law, any person who fails to apply for registration within the prescribed period is fined SAR 10,000.
Illustrative Example
If a Saudi-resident business's supplies over the past twelve months reached SAR 400,000, this exceeds the SAR 375,000 Mandatory Registration Threshold, so the business must apply for registration within thirty days of the end of the month in which the threshold was exceeded. If its supplies were only SAR 200,000, this exceeds the Voluntary Registration Threshold (SAR 187,500) without reaching the mandatory threshold, so the business is entitled, but not required, to register voluntarily.
Legal References
- GCC VAT Agreement — Article 50 and Article 51.
- IMPLEMENTING REGULATIONS OF THE VALUE ADDED TAX LAW — mandatory registration provisions (Article 3) and the thirty-day deadline.
- Value Added Tax Law — Article Forty-One (fine for failure to register).
For questions about your specific situation, you can ask the Saudi Arabia Tax & Legislation Helper on Helpers, or consult a licensed chartered accountant.