With the increasing number of overseas enterprises, tax and invoice issues are the problems that overseas enterprises have to face, in order to understand and learn the tax management and invoice use of different countries, some countries or regions will be selected for research around the world. This article mainly investigates Saudi Arabia’s tax system, tax types, declaration methods, system construction, invoice specifications, access requirements for invoice service providers, etc., hoping to help everyone.
1. Overview
Saudi Arabia is a country where church and state are united, with Islam as its state religion, so the country’s legal system is based on civil law and is governed by Sharia law. The Quran and Hadith (the words and deeds of the Islamic Prophet Muhammad) are important components of Sharia law and serve as the main legal basis for the courts to hear civil and criminal cases. The Royal Decree supplements regulations in the fields of labour and company law. There are also other forms of legislation, such as Council of Ministerial resolutions, ministerial resolutions and ministerial circulars, which are also part of the country’s legal system.
In 2024, the national GDP will be about $1.1 trillion, and the fiscal revenue is expected to be about $312.48 billion.
Saudi Arabia’s main sources of fiscal revenue include oil revenues, non-oil revenues and other revenues.
1. Oil revenue
Saudi Arabia is one of the world’s largest oil exporters, and oil revenues are its main source of finance. According to the International Monetary Fund (IMF), the price of Brent crude oil needed for Saudi Arabia to break even is $90 per barrel. However, international oil prices continue to fall, which is putting great pressure on Saudi Arabia’s financial situation. Goldman Sachs expects oil prices to end 2025 at $62 per barrel, which could lead to a serious fiscal deficit in Saudi Arabia 12.
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2. Non-oil income
To reduce its dependence on oil revenues, Saudi Arabia is working to diversify its economy and increase non-oil revenues. The non-oil sector achieved a growth rate of 4.3% in 2024, outperforming the overall GDP growth rate of 1.3%. Saudi Arabia’s main sources of non-oil revenue include:
- Tourism and hospitality: Saudi Arabia is working to attract foreign tourists, and Expo 2030 is expected to further boost tourism.
- Industry and Manufacturing: Saudi Arabia is investing in industrial parks and manufacturing to promote economic growth and employment.
- Agriculture: Saudi Arabia is committed to developing agriculture, increasing food self-sufficiency and reducing dependence on imports.
3. Other sources of income
In addition to oil and non-oil revenues, Saudi Arabia has several other sources of revenue, such as:
- Investment income: Sovereign wealth funds such as the Saudi Public Investment Fund (PIF) earn income by investing in domestic and foreign projects and companies.
- Trade revenue: Saudi Arabia’s trade activities also generate some income for the country.
Fiscal deficit
Saudi Arabia’s fiscal deficit is expected to increase significantly due to the continued decline in oil prices. Goldman Sachs predicts that Saudi Arabia’s fiscal deficit will more than double to $67 billion in 2024. To cope with the fiscal deficit, Saudi Arabia may need to further tighten fiscal policy, increase debt financing, or introduce new taxes.
In 2023, the number of micro-enterprises in Saudi Arabia will reach 1.1 million, the number of small enterprises will reach 151,170, and the number of medium-sized enterprises will reach 18,176, with a total of about 1.27 million enterprises. As of the first quarter of 2025, there were approximately 1,760,807 active commercial registered businesses in Saudi Arabia.
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2. Tax system
Saudi Arabia’s tax system continues to evolve under the framework of Vision 2030, aiming to transform from a resource-dependent economy to a diversified economy. Tax policies support the diversification of fiscal revenue, attract foreign investment, and improve the business environment. Tax administration is handled by the Zakat, Tax and Customs Authority (ZATCA), which is part of the Saudi Ministry of Finance and has the official website ZATCA. This agency is responsible for collecting and managing major taxes such as corporate income tax, religious tax (Zakat), and value-added tax (VAT).
ZATCA is the central tax authority responsible for the implementation and supervision of national tax policies, free from local taxes. The tax legal framework includes the Corporate Income Tax Law, the VAT Law and related regulations, and all financial records must comply with the Saudi Accounting and Auditing Organization (SOCPA) standards and be filed in Arabic in Saudi Arabia.
Official website: https://zatca.gov.sa
3. Types of taxes
The main taxes in Saudi Arabia include corporate income tax, zagat tax, value-added tax, consumption tax, customs duties, etc., and there is no personal income tax and stamp duty.
1. Corporate income tax
Among them, non-Saudi/GCC citizens are subject to 20% corporate income tax.
Saudi Arabia imposes corporate tax on companies, but it is limited to foreign-funded enterprises or companies with foreign shareholders. Wholly-owned enterprises in the country enjoy tax exemption privileges, which reflects the Saudi government’s support and protection of local enterprises (domestic enterprises impose a zincat tax, also known as a religious tax). The corporate tax rate for foreign-funded enterprises and mixed-ownership enterprises is 20%, but investments in Saudi Arabia’s underdeveloped provinces such as Haier, Jazan, and Abha can enjoy tax incentives for up to ten years.
2. VAT
Since January 1, 2018, Saudi Arabia has introduced VAT as an important measure to broaden non-oil revenue sources.
The standard rate of value-added tax (VAT) in Saudi Arabia is 15% and applies to most goods and services transactions. This rate will take effect on July 1, 2020, replacing the previous 5% rate.
At the same time, in order to protect people’s livelihood, basic daily necessities and services such as medical care, education, financial services and domestic transportation are included in the category of duty-free or zero tax rate, reflecting the humanistic care of the Saudi government in tax policy.
In Saudi Arabia and the UAE, businesses must register for VAT and pay taxes in accordance with the law if their sales reach a certain threshold, otherwise they will face consequences such as fines, tax audits, or business interruption.
3. Zigate tax
Saudi/GCC citizens pay a 2.5% zakat tax, which also becomes a zagat tax or religious tax (businesses registered with Saudi/GCC citizens are not subject to corporate income tax).
4. Customs duties
Saudi Arabia’s tariffs are relatively complex, with 5% within the GCC and 5.5%-25% for non-GCC imports, no tariffs on exports, and duty-free conditions in some countries.
5. Capital gains tax
The capital gains tax rate is 20%.
6. Excise tax
Saudi Arabia imposes consumption tax on specific industries, such as 100% for tobacco/e-cigarettes/energy drinks, 50% for soft drinks/sweetened drinks, and the tax base is retail price or standard price (whichever is higher)
7. Miscellaneous
Saudi Arabia imposes a 5% transaction tax on real estate transactions.
To optimize the tax environment, Saudi Arabia should consider double taxation agreements (DTTs) as a key way to attract foreign companies to the country, assuring them that their income will not be double-taxed. DTT already takes precedence over domestic tax rules and has signed more than 50 agreements with countries such as the United Kingdom, China, Switzerland and Japan.
4. Application method
Tax filings in Saudi Arabia are managed by the General Administration of Religious Taxes, Taxes and Customs (ZATCA, Tax and Customs Authority), covering corporate income tax, religious tax (Zakat), value-added tax (VAT) and other taxes. The declaration method is mainly completed through the electronic platform.
1. Value Added Tax (VAT) declaration
Businesses that meet the annual turnover requirement must register for VAT with the Saudi Tax Authority and submit VAT returns on a monthly or quarterly basis. Businesses with an annual turnover of more than SAR 375,000 must register as VAT payers. Taxpayers with an annual taxable amount of more than SAR 40 million in the previous year are required to file their tax returns on a monthly basis. Other taxpayers can file quarterly returns or apply to the tax department on a monthly basis. Taxpayers who file monthly returns can apply for quarterly filing after 2 tax fiscal years if the taxable amount in the previous year is less than 40 million SAR.
Required information for VAT registration:
- Business license (scanned copy of the original with official seal and English translation stamped by the translation company)
- Company power of attorney (printed on company letterhead, stamped with official seal, signed by legal person)
- Scanned copy of legal person’s passport or ID card
- Corporate bank account information
- Completed application form (English or bilingual)
- Data records on Amazon platforms or other sales platforms
VAT declaration is carried out through the platform https://login.zatca.gov.sa/ operates
2. Income tax declaration
Businesses owned by non-Saudi/GCC citizens, or non-residents doing business in Saudi Arabia through a permanent establishment (PE), are taxed at a rate of 20%. Electronic Filing: Submit annual tax returns through the ZATCA portal, including financial statements audited by Saudi certified public accountants (CPAs).
Annual returns are due within 120 days of the end of the financial year, and final taxes are due at the same time.
- Advance payment: Enterprises are required to pay three equal advance payments at the end of the 6th, 9th and 12th months, each of which is 25% of the previous year’s tax (after deducting withholding tax), and the advance payment is waived if the estimated tax amount is less than 500,000 riyals (SAR500,000).
- Required documents: Audited financial statements (in compliance with SOCPA standards, Saudi Accounting and Auditing Organization). Checklist of payroll with the records of the General Directorate of Social Insurance (GOSI). Withholding Tax (WHT) checklist for non-resident payments.
- Failure to file on time: Penalties are 5% (late ≤30 days), 10% (31-90 days), or 20% (91-365 days) of unpaid taxes.
- Incomplete declaration or intentional tax evasion: The penalty is 1% of gross income, up to SAR20,000.
Notes: Enterprises need to comply with transfer pricing rules and submit relevant documents; Special Economic Zone (SEZ) businesses are eligible for a 5% tax rate or exemption.
3. Tax declaration
Saudi and GCC citizens (individuals and businesses), tax rate of 2.5%, based on net worth or net profit. Submitting the Zakat return through the ZATCA portal is applicable to both individuals and businesses. Annual returns must be filed within 120 days of the end of the financial year, and taxes are paid at the same time.
Calculation Basis:
- Individual: Net worth (e.g., cash, investments, fixed assets) above the minimum threshold (Nisab).
- Enterprise: higher net assets or adjusted net profit.
Required Documents:
- balance sheet and income statement;
- Zakat Cardinality Calculation Table (template provided by ZATCA).
Punish:
- Failure to pay Zakat is a religious offence, but there is no fixed fine;
- Intentional underreporting may face administrative penalties.
Note: Non-Muslim residents can voluntarily contribute Zakat, and ZATCA provides an online calculation tool.
Declaration website: Enter the Zakat module of the https://zakaty.gov.sa/ website to declare, and the payment can be completed through transfer or SADAD payment system
5. Invoice related specifications
The use of electronic invoices in Saudi Arabia became mandatory from December 4, 2021, replacing traditional paper invoices for all value-added tax (VAT) taxpayers (except non-resident taxpayers).
The policy is divided into two phases:
Phase 1 (Generation Phase): From December 4, 2021, all taxpayers are required to generate and store electronic invoices and related bills (debit/credit notes) through an electronic system that complies with ZATCA requirements.
Phase 2 (Integration Phase): From January 1, 2023, taxpayers will be gradually required to integrate the e-invoicing system with ZATCA’s FATOORAH platform to submit invoice data in real time or near real-time through APIs. Applies to B2B, B2C, and B2G transactions, covering all taxable goods and services (including standard and zero rates).
- Taxpayers must generate invoices using an electronic invoicing system that complies with ZATCA technical standards, and invoices in paper, scanned or PDF format are no longer legal.
- The invoice must contain all legal fields (e.g. seller name, VAT registration number, invoice issuance time, total VAT, etc.) and must be issued in Arabic (other languages may be included).
- B2C invoices need to include a QR code (QRCode) for easy verification.
- E-invoices are stored in a structured electronic format (e.g., XML or PDF/A-3 embedded XML) for a period of 6-7 years and must be stored within Saudi Arabia or by a Saudi-registered third party.
- The system needs to be tamper-proof to ensure the integrity of the invoice.
From 2023, taxpayers will need to integrate their e-invoicing system with ZATCA’s FATOORAH platform via API, and B2B invoices will need to submit ZATCA for real-time verification within 24 hours of issuance (customs clearance model). Invoices need to include additional fields such as universally unique identifiers (UUIDs), electronic signatures, hashes, and cryptographic stamps to ensure security and authenticity.
B2C simplified invoices are reported to ZATCA within 24 hours of generation.
6. System construction
The Saudi electronic invoicing system is based on international electronic invoicing standards (such as Peppol, EU Directive 2014/55/EU) and adopts the Clearance Model based on local needs in Saudi Arabia, that is, invoices need to be verified through ZATCA’s FATOORAH platform.
ZATCA has developed detailed technical and business standards for electronic invoicing systems, ensuring compliance, security, and interoperability. Here are the main criteria:
1. Invoice format and data standards
Format: Electronic invoices must be in a structured format: XML (based on UN/CEFACT or OASIS UBL standards) or PDF/A-3 (embedded XML).
Must be in Arabic, additional languages may be added.
Required fields:
Common fields: Invoice type (standard/simplified), invoice number, date and time of issue, seller and buyer information (name, VAT registration number, address), transaction description, total amount, VAT amount.
Universal Unique Identifier (UUID): Uniquely identifies each invoice.
Hash: Ensures data integrity.
Digital Signatures and Cryptographic Stamps: Generated by ZATCA-certified cryptographic modules, preventing tampering.
Invoice Reference Number (IRN): Assigned by ZATCA for verification.
B2C invoices: QR codes must be included to encode key invoice information for easy verification.
ZATCA has published the E-Invoice Data Dictionary, which defines all fields and technical requirements, which can be downloaded from the ZATCA official website.
The fields comply with international standards (e.g., ISO 15000), ensuring compatibility with global e-invoicing systems.
Invoice sample – simple invoice
Invoice sample – standard invoice
2. Technical standards
API integration: The system needs to connect to ZATCA’s FATOURAH platform through RESTful APIs to support invoice submission, validation, and status query.
The API specification is based on OAuth 2.0 authentication and requires a production encryption stamp (PCSID) issued by ZATCA.
Encryption and Security: Generate digital signatures using ECDSA (Elliptic Curve Digital Signature Algorithm).
Invoices must contain a Cryptographic Stamp, which is generated by a ZATCA-certified cryptographic module.
Data transmission is encrypted with TLS 1.2 or higher.
Tamper-proof: The system needs to record invoice generation and modification logs to ensure audit traceability.
Direct modification of the invoice is prohibited, and the adjustment requires the reference to the original invoice through an electronic debit/credit note.
Time synchronization: The system needs to be synchronized with the ZATCA time server to ensure accurate invoice timestamps.
3. Storage standards
Storage period: Electronic invoices need to be stored for 6-7 years, in accordance with Saudi VAT law and electronic transaction law.
Storage location: Data is stored in Saudi Arabia or by a Saudi-registered third party.
Cloud storage must comply with the data protection requirements of the Saudi National Cybersecurity Authority (NCA).
Storage Format: Maintain the original XML or PDF/A-3 format to ensure readability and integrity.
The Peppol standard is recommended to facilitate cross-border transaction compatibility.
7. Invoice service access requirements
To ensure system compliance, ZATCA has set strict access requirements for the development, deployment, and operation of e-invoicing systems for taxpayers and solution providers.
1. Taxpayer access requirements
System certification: The electronic invoicing system used must pass the compliance test of ZATCA and obtain the electronic invoice unit ID (E-Invoice Unit ID).
The system needs to support all the functions of Phase 1 (invoice generation) and Phase 2 (API integration).
API Registration: Taxpayers need to register on the ZATCA portal to obtain API access.
Submit the system technical documentation, complete the sandbox testing, and obtain the PCSID after passing.
Compliance period: Depending on the size of the company’s revenue, the system integration must be completed by the deadline for the wave notified by ZATCA. For example: September 1, 2025: Annual income exceeds SAR 1.25 million (2022 or 2023).
December 31, 2025: Annual revenue exceeds SAR 1 million (2022, 2023 or 2024, Wave 22).
ZATCA gives 6 months’ notice to ensure preparation time.
Records and Audits: The system needs to support ZATCA audits, providing complete records of invoice generation, submission, and storage.
Regularly update the system to accommodate changes in ZATCA’s technology and regulations.
2. Solution Provider Access Requirements
Certification process: Providers need to apply for certification from ZATCA and submit technical specifications and safety test reports for their solutions.
The solution must comply with ZATCA’s Electronic Invoicing Implementation Standard and Safety Guidelines.
Feature Requirements: Support XML generation, QR code embedding, API integration, encryption stamp generation, etc.
Offers a user-friendly interface with support for multiple languages (at least Arabic and English).
Continuous Compliance: Providers regularly update their systems, fix vulnerabilities, and ensure compatibility with the ZATCA platform.
Provide technical support to help taxpayers complete the compliance transition.
Certified and well-known service providers:
International: Comarch, EDICOM, Pagero, Sovos, Deloitte (INTax).
Local: Qoyod, Wafeq, ClearTax Saudi.
These providers are ZATCA certified, covering a wide range of solutions from cloud to on-premises deployment.
System construction costs vary depending on size and complexity. Cloud solutions (such as Qoyod) cost about 100-500 SAR per month, and ERP integration in large enterprises may require tens of thousands of SARs.
3. Compliance checks
ZATCA checks system compliance through regular audits and API data validation.
Non-compliant systems can result in invoice rejections, triggering fines (5,000-50,000 SARs), or warnings.
Grace Period: As of June 20, 2025, ZATCA offers penalty waivers to encourage compliance.
4. System construction steps
Taxpayers or enterprises need to follow the following steps to build an electronic invoice system:
Needs Assessment: Determine transaction types (B2B/B2C), transaction volumes, and existing systems (e.g., ERP, POS).
Assess whether you need on-premises, cloud solutions, or third-party services.
Choose a solution: Choose a ZATCA-certified e-invoicing system (e.g., Qoyod, Edicom, SAP Ariba).
Ensure that the system supports API integration and multilingual interfaces.
System development/deployment: If you build your own system, you need to develop it according to ZATCA’s XML Implementation Standard and API Specification. Integrate encryption modules, generate UUIDs, and configure the system to integrate with existing ERP/POS if using a third-party solution.
API Integration: You need to register for the ZATCA portal to obtain an API key. Test the API connection in a sandbox environment to ensure that invoice submission and validation are functional. Testing and certification: Submit the system to ZATCA for compliance testing and obtain the E-Invoice Unit ID and PCSID.
Onboarding and Monitoring: Deploy the system to monitor the status of invoice submissions and ensure real-time synchronization with the ZATCA platform.
