How to Calculate VAT in Saudi Arabia — With Worked Examples

VAT in Saudi Arabia has a standard rate of 15% and applies to most goods and services. A registered business collects tax from its customers (output tax), deducts the tax paid on its purchases (input tax), and remits the difference to the Authority.

The basic formula

VAT = price before tax × 15%. A product priced at SAR 200 carries SAR 30 of tax, for an invoice total of SAR 230. To extract tax from a tax-inclusive price: VAT = inclusive price × 15 ÷ 115.

A worked example for a tax period

• Quarterly sales: SAR 400,000 → output tax SAR 60,000
• Taxable purchases: SAR 250,000 → input tax SAR 37,500
• Net tax due to the Authority: SAR 22,500

Common mistakes that cause penalties

Deducting input tax on non-qualifying expenses, forgetting small cash invoices, treating tax-inclusive prices as exclusive, and missing filing deadlines — all mistakes prevented by a system that calculates VAT automatically on every transaction.

When must your business register for VAT?

Registration is mandatory once your annual taxable revenue exceeds SAR 375,000, and optional above SAR 187,500 — often worthwhile since it lets you deduct input tax. Returns are filed monthly for businesses above SAR 40 million in revenue and quarterly below that. Watch your cumulative revenue: crossing the mandatory threshold without registering exposes you to penalties and back-dated tax.

With VAT management in Mawrid, every invoice's tax is calculated automatically, and your return figures are ready and classified at the end of each period.