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In KSA VAT, the businesses having annual value of supplies exceeding SAR 375,000 should mandatorily apply for VAT registration within the prescribed deadline. Those businesses with an annual value of supplies/expenses/purchases exceeding SAR 187,500 but within SAR 375,500 can seek a voluntary registration. To know more on the Mandatory and Voluntary registration, please read 'Who should register under KSA VAT'.
While the guidelines on who should register under Saudi VAT is clear, it will be possible only after calculating the value of annual supplies made during the period. This is crucial because, not all supplies made during the period are considered in determining the annual value which should be considered for VAT registration.
From the viewpoint of a business, supplies can be primarily classified into the following:
For the purpose of levy of the VAT, the supplies in KSA VAT law are classified into the following:
From 1st January, 2018 onwards, supplies made by the business need to be classified into any of the above-listed categories. The table below will help you to map your business supplies with the VAT supplies classification:
Type of VAT supplies |
Type of Business Transactions |
Taxable Supplies |
All Domestic Sales and Purchases |
Zero-rated Supplies |
Exports and other notified supplies |
Reverse Charge Supplies |
Imports and other notified supplies |
Exempt Supplies |
All type supplies mentioned above can be exempted if it is notified as exempt in LAW and regulations |
With the above understanding, let us understand the type of supplies which needs to be considered for calculating the VAT registration threshold.
Type of VAT supplies |
Included or Excluded from VAT Registration Threshold Calculation |
Taxable Supplies |
Included but excluding Capital assets purchase |
Zero-rated Supplies |
Included |
Reverse Charge Supplies |
Included |
Exempt Supplies |
Excluded |
From the above table, it is clear that except exempt supplies and taxable purchase of capital assets, the value of all other supplies should be considered in calculating the annual supplies value for VAT registration in Saudi Arabia.
Let us understand how to calculate the VAT turnover with an example.
Farhan Electronics is an electronic store in Riyadh, Saudi Arabia. They are engaged in supply of all types of electronic products. They also import certain products from other countries and supply it to the customers in KSA as well as export it to other countries. The following are the different types of supplies made by Farhan Electronics:
Type of Supplies |
Amount in SAR |
Taxable Supplies (Sale in KSA) |
575,000 |
Exports (Zero-Rated Supplies ) |
100,000 |
Exempt Supplies |
25,000 |
Imports |
150,000 |
Reverse Charge Supplies |
15,000 |
To determine Farhan Electronics eligibility for registration in KSA VAT, taxable supplies + exports (zero-rated supplies) + imports + reverse charge supplies should be considered. Exempt supplies will not be considered in arriving at the registration threshold. The registration threshold calculation for Farhan Electronics Trader is given below:
Type of Supplies |
Amount in SAR |
Taxable Supplies (Sale in UAE) |
575,000 |
Exports (Zero-Rated Supplies ) |
100,000 |
Imports |
150,000 |
Reverse Charge Supplies |
15,000 |
Turnover for VAT Registration |
840,000 |
The turnover of Farhan Electronics for VAT registration is SAR 840,000 which has exceeded the mandatory registration threshold of SAR 375,000. Thus, Farhan Electronics is required to register under Saudi VAT.
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