KSA Guide: VAT for E-Commerce Firms

VAT in KSA for E-Commerce Firms

According to the General Authority of Zakat and Tax, all online and e-commence business, transaction and activities must follow certain guidelines regarding VAT registration and payment. It has been made mandatory for all online enterprises to register for VAT if their annual turnover exceeds SAR 375,000. However, VAT registration in KSA is optional in case yearly sales of the e-commerce business fall between SAR 187,500 and SAR 375,000.

E-commerce business refers to buying and selling goods or services over an electronic network and digital platform including WhatsApp, Facebook, and Instagram. Among the regulations given by General Authority of Zakat and Tax, the key feature includes:

  • VAT Registration in KSA: E-commerce businesses are required to be registered with the Ministry of Commerce or the Ministry of Investment, and lastly with GAZT Portal.
  • VAT Certificate: Exhibit VAT certificate on digital platforms after getting approval of registration granted by GAZT within two business days.
  • VAT Filing: The VAT returns file is a must for all companies registering for VAT to avoid penalty.
  • VAT Payment: Payment of VAT to settle all the dues within the assigned time will prevent companies to encounter any legal issues.

VAT Rate on Goods Imported through E-commerce in KSA

According to the statement of the General Authority of Customs, all sales and purchases in e-stores that encompass importing products to Saudi Arabia through customs will be subject to a VAT of 15%.

GAZT also stated that if the supply is a service from outside the Kingdom, the recipient of the service in the KSA must calculate the tax according to the reverse charge mechanism. The reverse charge is defined as a mechanism by which the recipients of taxable services calculate the VAT payable instead of the non-resident supplier.

According to the tax agency, regardless of the value and volume of the supply, a non-resident supplier of services must register for VAT if the recipient is the end consumer – that is, for business-to-consumer transactions. Where services are supplied through electronic portals acting as an intermediary for non-resident suppliers, the operator of the electronic portal will instead be responsible for calculating the due VAT.
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