A keyword-rich, practical explainer for corporate taxpayers in Saudi Arabia on the VAT rate change from 5% to 15%, the timeline, transitional rules, invoice timing, ERP configuration, and how to keep your ZATCA compliance clean. As of 12 August 2025, the standard VAT rate remains 15%.
Become Our Featured Tax Expert.
This premium ad space is reserved for one tax professional. Put your firm in the spotlight and reach qualified Saudi Arabia leads directly.
To claim this exclusive spot, contact us at [email protected].
Key Timeline: 2018–2025
| Date | Event | Impact for Businesses |
|---|---|---|
| 1 Jan 2018 | VAT introduced at 5% | Systems go-live, registration, compliance processes begin. |
| 11 May 2020 | Increase to 15% announced | Suppliers prepare for pricing, contract and ERP updates. |
| 1 Jul 2020 | Standard VAT rate becomes 15% | All standard-rated supplies post this date taxed at 15% (subject to transitional rules). |
| 2021–2025 | E-invoicing phases, sectoral guidance | Better data quality, analytics and rate-application controls; rate remains 15%. |
Status check (12 Aug 2025): the standard VAT rate is 15%. Always verify special reliefs (zero/exempt) before invoicing.
Transitional Rules When the Rate Moved
- Long-term contracts signed before 11 May 2020: specific relief applied for certain contracts/customers; suppliers often needed documented eligibility and to switch to 15% at the earlier of renewal, amendment, or the end of an allowed window.
- Advance invoices/deposits around 1 Jul 2020: invoices issued before the effective date did not automatically lock 5%—the actual time of supply and transitional rules drove the rate.
- Continuous supplies (services/subscriptions): apportionment across periods was required; portions after 1 Jul 2020 generally at 15%.
Keep evidence: signed dates, scope, payment schedules, delivery/service milestones and customer VAT status.
Time-of-Supply & Invoice Timing (Which Rate Applies?)
The applicable rate is driven by the time of supply and transitional provisions. Typical triggers include the earlier of:
- Issuing a tax invoice,
- Receiving payment (for that amount),
- Delivery of goods or performance of services.
For continuous supplies (leases, maintenance, SaaS), the supply is often treated as occurring over time. Portions delivered after 1 Jul 2020 generally carry 15% unless a specific relief applied.
Contracts, Price Lists & Change Clauses
- Tax clause: Contracts should state that prices are exclusive of VAT and VAT changes are passed to the buyer.
- Change-in-law: Allocate rate-change risk; define when pricing is adjusted and how credit/debit notes are handled.
- Communication plan: Notify customers/suppliers about the rate change, effective dates, and invoice formatting.
ERP, POS & E-Invoicing Updates (Practical)
- Tax codes: Create/validate 5% legacy codes and 15% live codes; prevent posting the wrong rate post-cutover.
- Price display: Update catalogs, POS, websites; ensure dual display (net/VAT) where relevant.
- E-invoicing: Invoices must reflect correct rate, tax amount, and “standard rate 15%” tag; handle credit notes for re-rating.
- Controls & analytics: Exception reports for invoices at 5% after 1 Jul 2020; supplier-invoice checks for input VAT at correct rate.
- Training: Brief finance, sales, procurement on time-of-supply and transitional scenarios.
Worked Examples (Before/After 1 July 2020)
1) Goods delivered 30 June 2020, invoiced 2 July 2020
- Time of supply: Delivery was before the change → 5% (subject to transitional rules).
- Invoice: May still show 5% if the supply occurred on 30 June. Keep delivery proof.
2) Annual service 1 Apr–31 Mar (continuous supply)
- Portion 1 Apr–30 Jun 2020: 5%
- Portion 1 Jul 2020–31 Mar: 15%
- Billing: Split invoice or issue adjustment/credit note to reflect dual rates.
3) Advance invoice on 20 June 2020, services rendered 15 July 2020
- General outcome: Portion relating to post-1 July supplies re-rated to 15% (transitional rules considered).
- Action: Issue debit note for the 10% difference where required.
4) Input VAT on purchases after 1 July 2020
- Standard-rated inputs: 15% input VAT recoverable (subject to normal rules).
- Legacy 5% invoices: Ensure the supply occurred before 1 July or a valid transitional scenario applies.
Rate-Change Readiness Checklist
- Confirm time-of-supply for deliveries/services spanning 1 July 2020.
- Maintain a log of contracts signed before 11 May 2020 that may qualify for relief; evidence eligibility.
- Update ERP tax codes, price lists, and e-invoice templates.
- Run exception reports for incorrect 5% postings after the effective date.
- Align credit/debit note flows to correct mis-rated invoices.
- Brief customer-facing teams to answer “why did VAT change?” questions.
FAQ for Corporate Tax/VAT Teams
Does issuing an invoice before 1 July 2020 lock the 5% rate?
Not always. The time of supply and transitional rules determine the correct rate; supplies after 1 July generally move to 15%.
We received a supplier invoice at 5% dated July 2020—can we claim it?
Only if the underlying supply qualifies (e.g., delivered before 1 July or valid transitional scenario). Otherwise request a corrected invoice at 15%.
Are exports/zero-rated supplies affected?
Zero-rated/exempt rules are unchanged by the standard-rate increase, but check eligibility and documentary requirements.
Is the VAT rate still 15% now?
Yes, the standard rate remains 15% as of 12 August 2025.
SEO Takeaways for Corporate Readers
- Saudi VAT 5% to 15% timeline—key dates and business impact.
- Time-of-supply rules and transitional provisions for contracts and continuous supplies.
- ERP/POS tax code updates, e-invoicing formatting, and credit/debit notes.
- Supplier invoice validation and input VAT recovery at the correct rate.
- ZATCA compliance controls: rate checks, exception reports, documentation.
