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The obligation to issue credit and debit notes arises from two interconnected articles. Article 40 of the Implementing Regulations sets out the circumstances that require an adjustment to previously declared output tax. Article 54 then establishes when a credit note or debit note must be issued and what it must contain.

Article 40(1) lists the triggering events — the circumstances that cause a previously invoiced supply to require a VAT adjustment:

• Cancellation of the supply in whole or in part
• A change in the nature or quantity of goods or services supplied
• A change in the consideration agreed for the supply
• Return of goods by the customer
• Any other circumstances that cause the amount of VAT originally charged to differ from the true VAT on the supply

The GCC VAT Agreement (Article 57) frames the same principle: a taxable person who adjusts supply consideration must document the adjustment in a credit or debit note that corrects the original tax invoice. This document is treated in the same way as the original invoice.

Article 54(3) adds a third scenario: where neither of the Article 40(1) circumstances applies, but the supplier becomes aware of an error on the invoice — in their information or the customer’s — they may issue a credit or debit note to correct that error. This covers factual mistakes such as a wrong customer address or a mis-stated TIN, even where the VAT amount itself is correct.

Under Article 54(4), a credit or debit note must contain all the information required in the corresponding invoice — that is, if it relates to a full tax invoice, it must contain all the fields of a full tax invoice; if it relates to a simplified tax invoice, the simplified fields apply.

In addition, Article 54(4) imposes two specific requirements unique to adjusting documents:

• Reference to the sequential number of the original tax invoice to which the credit or debit note relates — this is a mandatory link between the two documents
• A clear reference to previously issued tax invoices related to the supply, as specified by ZATCA — in practice, this means identifying the original invoice by number and date

Article 54(5) adds that the note should include any discount information that would be required on the corresponding invoice.

The return period in which a credit or debit note is reported depends on whether it produces an increase or decrease in the supplier’s output tax, governed by Article 40(4) and (5):

Article 53(7) of the VAT Implementing Regulations sets out the two circumstances in which a taxable person may issue a simplified tax invoice:

The practical design intention is clear: simplified invoices serve retail, hospitality, fuel, and consumer-facing service transactions. Any supply to a business where that business will want to recover input VAT requires a full tax invoice, because the simplified invoice does not contain the fields necessary to support a compliant input tax deduction.

Article 53(8) specifies that a simplified tax invoice must contain at minimum:

• Date of issue — the date the document is created and issued
• Name, address, and TIN of the supplier — the full name and address of the business, along with its ZATCA-issued Tax Identification Number
• Description of the goods or services supplied — sufficient to identify what was provided
• Total consideration payable — the full amount the customer pays, inclusive of VAT
• VAT payable, or a statement that the consideration is inclusive of VAT — either the SAR VAT amount, or a clear statement that the price shown includes VAT at 15%

The simplified invoice omits several fields that appear on a full tax invoice. The most significant omissions are the customer’s name and TIN, the date of supply (separate from issue date), and the per-unit price exclusive of VAT.

These are not administrative omissions — they are the fields that enable a business customer to establish its input VAT recovery entitlement. Without the customer’s identity, ZATCA cannot verify who is claiming the deduction. Without a sequential invoice number (which is not required on a simplified invoice), tracing the document in an audit is significantly harder.

Saudi Arabia’s e-invoicing (Fatoorah) framework applies to simplified invoices as well as full tax invoices. Phase 1 of e-invoicing required electronic generation of both types. Under the Phase 2 integration requirements, simplified invoices are subject to reporting mode (not clearance mode) — meaning they do not require real-time clearance through ZATCA’s platform before being issued, but must be reported to ZATCA within a specified timeframe.

E-simplified invoices must contain a QR code that, when scanned, reveals the core invoice data in a standardised format. This QR code is a ZATCA technical requirement layered on top of the Article 53(8) mandatory field requirements.

Article 66(3)(h) requires that electronic invoices — including e-simplified invoices — be retained in the structured electronic format prescribed by the e-invoicing regulations, not simply printed and filed as paper copies.

Under Article 53(5) of the VAT Implementing Regulations, a tax invoice must include all the listed details — in Arabic, with any other language as a translation. The word “must” is not qualified. There is no provision for a substantially compliant invoice with minor omissions. Either all fields are present and complete, or the invoice does not meet the legal standard.

The practical consequence of a deficient invoice falls primarily on the customer: a business that holds a non-compliant tax invoice cannot use it to support an input VAT deduction under Article 49. The supplier faces penalties for issuing a non-compliant document. Neither party benefits from careless invoicing.

Field (a) — Date of Issue

Field (b) — Sequential Invoice Number

Field (c) — Supplier’s Tax Identification Number (TIN)

Field (d) — Customer’s TIN and Reverse Charge Statement

Field (e) — Name and Address of Supplier and Customer

Field (f) — Quantity and Nature of Goods / Scope and Nature of Services

Field (g) — Date of Supply (Where Different from Date of Issue)

Field (h) — Taxable Amount, Unit Price Ex-VAT, and Discounts

Field (i) — Rate of VAT Applied

Field (j) — Amount of VAT Payable in SAR

Field (k) — Narration on Non-Standard VAT Treatment

Field (l) — Profit Margin Reference (Used Goods)

Saudi VAT invoicing requirements are established in Article 53 of the VAT Implementing Regulations, issued under VAT Law Royal Decree No. M/113. The GCC VAT Agreement provides the overarching framework in Articles 55 to 58, with the Kingdom implementing the detail through the Regulations.

Article 53(11) of the Implementing Regulations confirms that the term “Tax Invoice” — wherever it appears in the Regulations — covers invoices issued in accordance with any paragraph of that article. This means both the full tax invoice and the simplified tax invoice are legally equivalent instruments for the purposes they are intended to serve. The key distinction is in what they can be used for and by whom.

The invoicing framework sits alongside the e-invoicing (Fatoorah) system introduced by ZATCA in two phases, which integrates with the paper and electronic requirements set out in Article 53. The Governor of ZATCA has the right to amend invoice details and specify additional requirements for e-invoicing purposes.

Under Article 53(1) of the Implementing Regulations, a taxable person must issue a tax invoice in the following cases:

• Any taxable supply of goods or services made to another taxable person or to a non-taxable legal person
• Any taxable supply of goods or services made to a non-taxable natural person where the value of that supply exceeds SAR 1,000
• Deemed supplies of goods or services
• Any receipt of full or partial consideration prior to the date of supply

The GCC VAT Agreement (Article 55) additionally requires a tax invoice or equivalent document for deemed supplies as defined in Article 8 of the Agreement. Exempt supplies may be excluded from the invoicing obligation, subject to ZATCA’s determination — though good practice is to document all supplies, including exempt ones, to support input VAT apportionment claims.

Article 53(5) sets out the mandatory content of a full tax invoice. Every field is required — there is no hierarchy of importance, and the absence of any one of them renders the invoice non-compliant. The fields must be shown in Arabic, though translations into other languages may be included alongside.

Article 53(7) permits the issue of a simplified tax invoice in two circumstances: where the supply is made to a person other than another taxable person or non-taxable legal person, and where the supply is made to another taxable person but the consideration does not exceed SAR 1,000.

A simplified invoice requires only five fields (Article 53(8)):

• Date of issue
• Name, address, and TIN of the supplier
• Description of the goods or services supplied
• Total consideration payable
• VAT payable, or a statement that the consideration is inclusive of VAT

Simplified invoices are designed for high-volume B2C transactions — retail sales, restaurant meals, petrol station transactions, and similar consumer-facing supplies. They cannot be used to support a business customer’s input VAT claim without the full mandatory fields. A customer holding only a simplified invoice cannot use it to recover input tax.

Once a tax invoice has been issued, it cannot simply be amended or cancelled. Any adjustment to the VAT previously charged must be made through a formal credit note (where the VAT was overstated) or debit note (where it was understated), as set out in Article 54.

The circumstances that trigger a mandatory credit or debit note include: cancellation of a supply, changes in the nature or quantity of goods or services, changes in consideration, goods returned, and any other post-invoice adjustment that changes the VAT amount.

A credit note or debit note must contain all the mandatory fields of the corresponding invoice type (full or simplified) and must include a clear reference to the sequential number of the original tax invoice to which it relates. This link between the adjusting document and the original invoice is a ZATCA requirement — credit notes issued without the original invoice reference are non-compliant.

GCC VAT Agreement Article 58(1) permits a taxable customer to issue a tax invoice in respect of a supply they receive — provided the supplier consents and the invoice is marked as a self-issued invoice with the approval of the competent tax administration. When validly issued, a self-billed invoice is treated as if the supplier issued it.

Article 53(2) of the Implementing Regulations implements this: a customer may issue a tax invoice on behalf of the supplier where both parties agree in writing that the customer will issue the invoice, and the supplier confirms they will not issue invoices for those supplies independently. This arrangement requires clear written agreement and is common in sectors such as media buying, commodity trading, and procurement where the buyer has better information about transaction values.

Saudi Arabia’s e-invoicing (Fatoorah) framework was introduced in two phases. Phase 1 (December 2021) required taxable persons to issue, store, and share structured electronic invoices. Phase 2 (from January 2023, rolled out by taxpayer segment) requires integration with ZATCA’s platform (Zakat, Tax and Customs Authority) for real-time or near-real-time invoice clearance.

Article 53(6) confirms that tax invoices must be issued in electronic format where prescribed by the Minister of Finance or the Board of Directors under the e-invoicing regulations. Article 53(9) gives the ZATCA Governor the right to specify additional details on invoices for e-invoicing purposes — and ZATCA has used this authority to require QR codes, UUID references, and cryptographic stamps on e-invoices.

Article 53(10) — subsequently amended — gave ZATCA the authority to suspend or revoke e-invoicing obligations for specific taxpayer groups, providing flexibility for compliance transitions. The underlying mandatory field requirements of Article 53(5) and (8) remain unchanged regardless of format.

• Missing mandatory fields. A single absent field — the date of supply, the sequential number, the VAT in SAR — renders an invoice non-compliant. The customer cannot recover input VAT on a deficient invoice, and the supplier may face penalties for issuing one.
• VAT amount not expressed in SAR. Foreign currency invoices that show VAT only in the foreign currency, without a SAR conversion, breach both Article 53(5)(j) and GCC VAT Agreement Article 56(2).
• Simplified invoices issued for B2B transactions above SAR 1,000. The customer cannot use a simplified invoice to support an input tax claim. The error cannot be corrected retrospectively without reissuing a compliant full tax invoice.
• Credit notes issued without reference to the original invoice. A credit note that does not clearly reference the sequential number of the original tax invoice is non-compliant under Article 54(4). ZATCA will disallow the associated output tax adjustment.
• Invoices not issued in Arabic. Article 66(2) requires all tax invoices to be issued in Arabic. Other languages may be included as translations but Arabic must be present. An invoice in English only — however common — does not meet the legal requirement.
• Invoices issued after the tax point without justification. The invoice should be issued at or near the time of supply. Systematic late invoicing distorts VAT period reporting and creates audit exposure.

Accurate RCM reporting in the VAT return is the output of a process that starts long before the return is prepared. The most common reason businesses get the RCM wrong is not a misunderstanding of the rules — it is the absence of a systematic upstream process that captures the relevant transactions in the right way at the right time.

Before preparing any VAT return that includes reverse charge items, three things must be in place:

• A complete supplier register. Every non-resident supplier from whom services are regularly procured should be identified and flagged in the purchase ledger as an RCM supplier. New non-resident vendors should be reviewed at onboarding and tagged accordingly.
• A date-of-supply discipline. The posting of foreign service invoices in your accounting system must be keyed to the date of supply — not the date the invoice was received, not the date of payment, and not the accounting close date. The date of supply determines the VAT period.
• A SAMA rate reference process. For every foreign-currency invoice from a non-resident supplier, the Saudi Central Bank daily exchange rate on the date of supply must be recorded and stored alongside the invoice. This is not optional — it is the legally required conversion basis under Article 61.

Article 62(2)(d) of the Implementing Regulations explicitly requires the VAT return to disclose “the total value of all supplies of goods and services to the taxable person where the tax is payable by the taxable person under the reverse charge mechanism.”

This means the return has two separate, distinct components for reverse charge supplies:

For a fully taxable business, these two entries cancel each other out — the net VAT payable position is unchanged. But both entries must appear in the return. A return that omits the output tax on imported services is an output-tax understatement, regardless of whether the input tax was also omitted.

The reverse charge output tax and the corresponding input tax must be reported in the VAT return for the period in which the supply took place — not the period in which the invoice was received, processed, or paid.

Where invoices from non-resident suppliers arrive significantly late, businesses should establish an accrual process — estimating the RCM liability for services known to have been received but not yet invoiced, and correcting in the period the actual invoice is received if the estimate differs from the final value.

Correcting Past Errors

Article 63 of the Implementing Regulations sets out the correction process for returns. Where a Taxable Person becomes aware of an understatement in a prior return — including omitted RCM output tax — they must notify ZATCA within twenty (20) days of becoming aware of the error. The correction is made in the return for the period in which the error is discovered, subject to the conditions in Article 63.

For businesses that make both taxable and exempt supplies — including banks, insurance companies, and mixed real estate businesses — the input tax recovery on reverse charge supplies is subject to the same proportional deduction methodology as all other input tax under Article 51.

Partial-exemption businesses must therefore track the proportional recovery rate applicable to RCM supplies in each period, using the Article 51 default method or any approved alternative method. Claiming 100% input tax recovery on all RCM supplies when only a proportion is entitled is a specific form of input tax overclaim that ZATCA can identify straightforwardly by cross-referencing the return data.

Before finalising the VAT return for each period, work through this checklist for reverse charge items:

• Have all non-resident service invoices received in the period been reviewed? Flag every purchase from a supplier with a non-Saudi address and check whether RCM applies to each one.
• Have services received but not yet invoiced been accrued? If a non-resident supplier has delivered services in the period but has not yet issued an invoice, the date of supply may have already occurred. Accrue the RCM liability based on the contract value or estimated cost.
• Has the SAMA daily rate been applied on the correct date for each foreign-currency transaction? The rate on the date of supply — not invoice receipt, not payment — is the required basis.
• Has the total RCM supply value been populated in the correct return field? Article 62(2)(d) requires explicit disclosure of the total value of supplies subject to RCM.
• Has the corresponding output tax been declared? The 15% self-assessed output tax must appear in the output tax section of the return.
• Has the input tax been claimed correctly based on the applicable recovery rate? Fully taxable businesses claim 100%. Partial-exemption businesses apply their proportional deduction fraction. Fully exempt businesses claim nothing.
• Have any marketplace-supplied services been correctly excluded from RCM self-assessment? If a marketplace is acting as deemed supplier and charging VAT directly, the Saudi customer should not also self-assess on the same supply.

• Omitting the RCM output tax entirely. Processing foreign invoices as costs without self-assessing output tax. This produces an output tax understatement in every affected period.
• Reporting in the wrong period. Processing the RCM in the period the invoice is received rather than the period the supply occurred. Both periods are incorrect.
• Using the wrong exchange rate. Applying month-end, average, or payment-date rates rather than the SAMA daily rate on the date of supply.
• Claiming 100% input tax when the business is partially exempt. Partial-exemption businesses overclaim input recovery on RCM supplies when they fail to apply the proportional deduction.
• Self-assessing on marketplace-collected VAT. Double-assessing on a supply where the online marketplace is already collecting and remitting VAT as a deemed supplier.
• Missing non-obvious RCM triggers. Failing to identify digital advertising, data subscriptions, and online tools as within-scope electronic services, and processing them as ordinary costs without RCM treatment.

Before the April 2025 amendments, the online interface and portal rules under the old Article 47(2) were narrowly constructed. They applied only to electronically supplied services supplied through an interface or portal acting as an intermediary for a non-resident supplier. The deemed-supplier presumption could be rebutted by meeting two conditions: the non-resident was expressly identified as the supplier, and the interface operator did not authorise charging or set the general terms.

The April 2025 amendments — issued under ZATCA Board Resolution No. 01-06-24, published in Official Gazette Issue 5082 on 18 April 2025 — recast this framework across three new provisions:

The new Article 47(4)(b) defines an online marketplace for the first time with explicit regulatory language:

The phrase “one of its primary purposes” is deliberate and significant. A platform does not need to be exclusively a marketplace to fall within the definition. If facilitating supplier-customer transactions is one of its core functions — even alongside other functions — it qualifies.

At the same time, Article 47(4)(a) specifies that a platform is not considered to facilitate a supply if its role is limited to:

• Processing payments related to purchases on behalf of suppliers
• Marketing and advertising the goods or services offered through it, without facilitating the actual supply process
• Redirecting customers to another online marketplace that undertakes the supply facilitation

Pure payment processors, comparison sites that redirect users, and advertising tools that do not engage in the actual supply process are outside the definition. Active intermediaries — those that genuinely bring supplier and customer together and facilitate the transaction — are inside it.

Under the amended Article 47(2), where services are facilitated electronically in the Kingdom through an online marketplace acting as intermediary for non-resident suppliers, the online marketplace is deemed to have:

• Purchased the services from the non-resident supplier for its own account
• Re-supplied them in its own name and on its own account to the customer
• Become responsible for collecting and paying the VAT on those taxable supplies

The marketplace does not merely assist — it becomes the supplier for Saudi VAT purposes. The non-resident underlying provider drops out of the Saudi VAT picture entirely for those supplies.

The Exception: When the Marketplace Escapes Deemed-Supplier Status

The deemed-supplier rule does not apply if all three of the following conditions are simultaneously met:

Meeting all three conditions simultaneously in an active digital commerce context is extremely difficult. Any platform that manages the customer relationship, processes complaints, offers refunds, sets pricing, or presents itself as the contracting party fails at least one condition. Most active marketplaces will not qualify for the exception.

The new Article 47(3) — effective 1 January 2026 — closes a different gap. It addresses the situation where goods or services are supplied in the Kingdom through an online marketplace acting as intermediary for resident suppliers who are not VAT-registered.

Under this provision, the marketplace is again deemed to have purchased those goods or services for its own account and re-supplied them — and bears the VAT obligation on the taxable supplies made through its platform.

The exception conditions under Article 47(3) mirror those under Article 47(2) — but with modified terms reflecting the resident supplier context:

• The non-registered resident supplier must be explicitly identified as the supplier in all documents and communications
• An independent and direct contractual relationship must exist between the non-registered supplier and the customer
• The marketplace must play no role in setting terms, determining price, charging, collecting payment, handling complaints, or offering compensation

Article 24 of the VAT Implementing Regulations provides a broad, non-exhaustive definition of wired and wireless telecommunications services and electronic services. The list is deliberately wide — the regulation was drafted to capture the full range of digital commerce rather than a finite set of categories that technology would quickly outgrow.

Covered services include:

• Any service relating to the transmission, emission, or reception of signals, writing, images, sounds, or information by wire, radio, optical, or other electromagnetic systems
• Transfer or assignment of the right to use capacity for transmission
• Provision of access to global information networks (internet access)
• Audio and audio-visual content broadcast on a program schedule by a person with editorial responsibility
• Live streaming via the internet
• Supplies of images or text electronically — photos, screensavers, e-books, digitised documents
• Supplies of music, films, games, and on-demand programs
• Online magazines
• Website supply and web hosting services
• Distance maintenance of programs and equipment
• Supplies of software and software updates
• Advertising space on websites and related rights

Article 20 of the GCC VAT Agreement places telecommunications and electronically supplied services at the place of actual use or enjoyment of those services. This is reinforced in Article 24(2) and (3) of the Implementing Regulations.

For a Saudi customer using cloud software, accessing a data platform, or consuming digital content, the place of use and enjoyment is Saudi Arabia. The place of supply is Saudi Arabia. Saudi VAT applies.

How the Supplier Determines the Customer’s Location

Article 24(4) provides a list of indicators that a supplier may use to determine the customer’s usual place of residence for electronic services:

A critical rule from Article 24(5): the place of supply is determined based on the circumstances at the time of the supply. Subsequent changes in where the customer uses the service — travelling abroad, for example — do not retroactively change the VAT treatment.

The VAT treatment of digital services to Saudi customers depends critically on whether the recipient is a business (B2B) or a private individual (B2C). The mechanism is different in each case.

B2B Digital Services: The Reverse Charge Applies

A Saudi VAT-registered business purchasing a SaaS licence, cloud infrastructure, data analytics, or digital advertising from an overseas provider handles VAT via the reverse charge. The overseas provider does not charge Saudi VAT. The Saudi business self-assesses 15% on the subscription value and reports it in its VAT return — simultaneously claiming the input tax to the extent it is recoverable.

B2C Digital Services: The Provider (or Marketplace) Must Account

A Saudi private individual purchasing a streaming subscription, downloading an app, or accessing a gaming platform cannot self-assess. The reverse charge mechanism does not work for non-taxable customers. The VAT must therefore be collected either by the non-resident supplier directly — requiring Saudi registration — or by the online marketplace through which the supply is facilitated, under the deemed-supplier rules.

For Saudi businesses procuring digital services from overseas providers, the compliance obligations are straightforward — but require systematic process, not ad hoc treatment:

• Catalogue all overseas digital service subscriptions. Identify every non-resident provider from which digital services are received. This includes software, cloud services, data platforms, digital advertising networks, and any online tools or platforms billed from overseas.
• Confirm each supplier’s residency status. A provider with a Saudi subsidiary or registered branch may not be a non-resident supplier for the relevant supplies. Verify which entity is invoicing and from where.
• Apply the RCM to every qualifying subscription. Each monthly or annual billing triggers a self-assessment obligation. This cannot be done annually in a lump sum — it must be reflected in the VAT return for each period in which the supply occurred.
• Use the correct SAMA rate on each supply date. Do not use payment-date rates, month-end rates, or average rates for the conversion calculation.
• Track the input tax recovery entitlement. If the business makes exempt supplies, not all of the self-assessed input tax is recoverable. Apply the proportional deduction methodology consistently across all RCM supplies.

When a non-resident supplier provides services to a VAT-registered Saudi business and the place of supply is Saudi Arabia, the reverse charge mechanism applies. The Saudi customer accounts for the VAT — and the non-resident supplier has no Saudi VAT obligation on that supply. This is the position for the majority of B2B cross-border service transactions.

The GCC VAT Agreement (Article 41) establishes the principle: where the place of supply is in a Member State in which the supplier is not resident, the taxable customer in that State is obligated to pay the tax due. The Kingdom has implemented this through Article 47(1) of the Implementing Regulations.

The RCM protection has limits. There are specific circumstances in which a non-resident supplier is required to register for VAT in Saudi Arabia and account for the tax directly:

Supplying Directly to Non-Taxable Customers (B2C)

Where a non-resident supplier provides services — particularly digital and electronic services — directly to Saudi private individuals or non-VAT-registered entities, the RCM cannot operate. The customer has no VAT return to self-assess on. In this scenario, the obligation to collect and remit Saudi VAT falls back on the non-resident supplier — which means registration is required.

Supplying Goods (as Distinct from Services)

Goods imported into Saudi Arabia are subject to import VAT collected at the border by customs — not through the RCM. A non-resident supplier of goods that physically enters the Kingdom does not typically need a Saudi VAT registration solely on account of those supplies, since import VAT is handled at entry. However, if the non-resident is making taxable supplies of goods within Saudi Arabia — after customs clearance, to Saudi customers — the analysis is different and may require registration.

Operating as an Online Marketplace

Under the April 2025 amendments to Article 47, online marketplace operators that facilitate taxable supplies in Saudi Arabia through their platforms are deemed to be suppliers for VAT purposes. If such a platform is a non-resident entity, it must register in the Kingdom to fulfil its VAT collection and remittance obligations.

Fixed Establishment in Saudi Arabia

A non-resident that has a fixed establishment in the Kingdom — a branch, a permanent office, or any location with the permanent presence of human and technical resources capable of making or receiving supplies — is not truly non-resident in relation to supplies connected to that establishment. Those supplies are treated as made by a resident entity and must be registered and accounted for accordingly.

Article 9(3) of the Implementing Regulations sets out the registration mechanics for non-resident persons. A non-resident who is required to register in the Kingdom must do so either:

• Directly — by submitting the prescribed application form to ZATCA in the format it requires, or
• Through a ZATCA-approved tax representative — a Saudi-resident entity appointed to act on behalf of the non-resident for VAT compliance purposes

The particulars of the tax representative, if one is appointed, must be listed on the registration application. If the non-resident subsequently changes its tax representative, it must notify ZATCA within twenty (20) days of the change (Article 9(4)).

What a Tax Representative Does

A tax representative acts as the Saudi compliance agent for the non-resident supplier. In practice this means:

• Filing VAT returns on the non-resident’s behalf with ZATCA
• Issuing compliant tax invoices for Saudi supplies made by the non-resident
• Corresponding with ZATCA on assessments, enquiries, and disputes
• Maintaining VAT records for the non-resident’s Saudi activities

The tax representative bears joint liability for compliance failures in the non-resident’s Saudi VAT obligations, which means qualified, experienced representatives with appropriate indemnity arrangements are essential.

Saudi businesses procuring services from non-residents should build VAT analysis into their supplier onboarding and contract processes. Key questions to address upfront:

Before any self-assessment can be performed, a business must have a reliable process for identifying which of its purchases from foreign suppliers trigger the reverse charge. This sounds straightforward. In practice, it requires deliberate systems — because nothing in the foreign supplier’s invoice signals that Saudi VAT is owed. The trigger is invisible without internal process.

The identification process should cover:

• Supplier residency check. For each foreign vendor, confirm that they have no fixed establishment or branch in Saudi Arabia. A supplier invoicing from a foreign address but with a Saudi subsidiary registered in the Kingdom is not a non-resident supplier for supplies made by that Saudi entity.
• Place of supply analysis. Confirm that the service is treated as supplied in Saudi Arabia. For most B2B professional services and digital services to a Saudi-based customer, this is straightforward. For some services — those performed on goods located abroad, or consumed outside the Kingdom — the analysis requires more care.
• Nature of the supply. Confirm that the supply is a service rather than goods. Goods imported into Saudi Arabia are subject to import VAT at the border — not the reverse charge mechanism. The RCM applies specifically to imported services.

The date of supply determines which VAT period the self-assessment falls into. Under the standard invoice accounting basis, the date of supply for services is the earlier of:

• The date the service is performed or completed
• The date an invoice is issued in respect of the supply
• The date payment is received

For continuous services — a monthly SaaS subscription, an annual maintenance contract, a rolling retainer — the date of supply is assessed on each successive billing interval, or at least once in any twelve-month period.

Article 61 of the Implementing Regulations is explicit: where any relevant amount is expressed in a currency other than Saudi Riyal, it must be converted using the daily rate prescribed by the Saudi Central Bank on the date that the tax becomes due.

The date the tax becomes due is the date of supply — not the date of payment, not the date the invoice is processed, and not the month-end rate or an average rate. Using any other rate produces an incorrect self-assessed VAT figure.

For businesses receiving large volumes of foreign-currency invoices, the operational discipline of recording the SAMA rate on each date of supply — and storing that rate alongside the invoice — is essential. ERP systems that default to payment-date or month-end rates must be configured specifically for RCM transactions.

Once the supply is identified, the date confirmed, and the currency converted, the calculation is simple:

Under Article 47(1), the taxable customer must report both the output tax on the supply and any input tax to the extent the customer can benefit from input VAT deduction — in the Tax Return for the period in which the supply occurred.

What the Tax Return Must Show

Article 62 of the Implementing Regulations requires the VAT return to disclose, among other items:

• The total value of all supplies to the taxable person where tax is payable under the reverse charge mechanism (Box D in the ZATCA return format)
• The corresponding output tax on those supplies
• The input tax claimed in respect of those supplies, to the extent recoverable

Reporting reverse charge supplies in the wrong box — or omitting them from the return entirely — is the most common RCM compliance failure. It produces an output tax understatement in the period and an incorrect total supply value, both of which ZATCA identifies during risk-based audit selection.

For reverse charge supplies, the taxable customer must retain documentation sufficient to support the self-assessment. This includes:

• The original invoice from the non-resident supplier, showing the service description, value, and the supplier’s identity and address
• Evidence of the date of supply and the basis on which it was determined
• The Saudi Central Bank daily exchange rate used and on which date it was sourced
• The internal RCM calculation workings, showing the VAT amount self-assessed
• The VAT return in which the transaction was reported, confirming it was filed in the correct period

Records must be retained for the applicable limitation period under Saudi VAT rules — generally five years from the end of the tax period to which they relate, though ZATCA may in certain circumstances assess beyond this window.

Standard VAT works in a straightforward direction: the supplier charges VAT on their invoice, collects it from the customer, and remits it to the tax authority. The reverse charge flips that sequence.

Under the reverse charge mechanism, the customer — not the supplier — accounts for the VAT. The non-resident supplier issues an invoice without Saudi VAT. The Saudi customer calculates 15% on the service value, reports it as output tax in their own VAT return, and simultaneously claims it back as input tax — to the extent they are entitled to input tax deduction.

The mechanism is grounded in Article 9 of the GCC VAT Agreement, which establishes that a taxable person in a Member State who receives services from a non-GCC-resident person is deemed to have supplied those services to themselves — and the supply is taxable under the reverse charge. The Kingdom implemented this through Article 47(1) of the VAT Implementing Regulations.

For the reverse charge to apply in Saudi Arabia, three conditions must all be met at the time of the supply:

In practice, the following categories of services from non-resident suppliers regularly trigger the reverse charge for Saudi businesses:

• Professional services: Legal advice, consulting, accounting, auditing, tax advisory, and management services provided by foreign firms to Saudi corporate clients
• Software and SaaS: Cloud-based software subscriptions, enterprise platforms, productivity tools, and any software-as-a-service licensed from overseas providers
• Cloud infrastructure: Web hosting, data storage, cloud computing, and server services from global hyperscalers and hosting providers
• Intellectual property: Licence fees for patents, trademarks, copyrights, and know-how owned by non-resident entities
• Digital advertising: Online advertising placements, social media marketing, and programmatic advertising purchased from non-resident platforms
• Training and e-learning: Online educational programmes, virtual training courses, and learning platforms supplied electronically
• Research and data services: Market data, research reports, and database subscriptions from foreign providers
• Maintenance and support: Remote technical support, system maintenance, and helpdesk services performed by non-resident providers

The reverse charge operates by treating the Saudi customer as if they have both made and received the supply. This “self-supply” fiction produces the following accounting steps:

For businesses that make both taxable and exempt supplies — banks, insurance companies, mixed real estate businesses — the input tax recovery on reverse charge supplies is subject to the same proportional deduction rules as any other input tax. The output tax is always 100% declared; the input recovery is only partial.