Reverse charge on services from abroad

The situation

A VAT-registered business that buys services from a non-resident supplier usually accounts for VAT itself under the reverse charge.

The law

• Saudi VAT Law (Royal Decree M/113), standard rate 15 percent from 1 July 2020: Standard VAT rate is 15 percent
• Art 68, Income Tax Law and Art 63, Implementing Regulations: Residents and PEs withhold tax on payments to non-residents from a Saudi source at 5, 15 or 20 percent

What it means for you

Example: SAR 50,000 agency fee: declare SAR 7,500 output VAT and claim SAR 7,500 input VAT if fully taxable. Withholding tax may also apply to the payment. Keep the foreign invoice and contract.

What to do

1. Declare reverse charge output VAT.
2. Claim input VAT if eligible.
3. Check WHT on the payment.

Related

• Late VAT payment penalty calculation
• Nil VAT return
• Credit note timing after the 2025 change
• Unpaid supplier invoice after 12 months
• Transferring the business and VAT
• Input VAT on staff entertainment and hotels