What is VAT?
Value Added Tax (or VAT) is an indirect tax imposed on all goods and services that are bought and sold by businesses, with a few exceptions. VAT is applied in more than 160 countries around the world as a reliable source of revenue for state budgets.
VAT is imposed at each stage of the supply chain from the production and distribution to the final sale of the good or service, as illustrated below:
The consumer pays the VAT cost on purchased goods and services. Businesses pay the government the VAT collected from their customers’ purchases and refund the VAT they paid to their suppliers.
In June 2016, the GCC countries agreed to impose VAT across the GCC region. In February 2017 (Jumada Al-Awwal 1438), Saudi Arabia ratified the GCC VAT framework and committed to impose VAT with effect from January 1, 2018 (Rabi Al-Thani 14, 1439). VAT will be introduced at a standard rate of 5%.
The General Authority of Zakat and Tax (GAZT) is responsible for managing the implementation, administration and enforcement of VAT in Saudi Arabia. It does so in close coordination with other relevant entities.
The VAT Law, that was published in H1438/11/4, is available in full here. All goods and services will be subject to VAT. However, some goods and services will be exempt. For further information on exempted items please read chapter 5 of the Implementing Regulations. Taxation will be based on the nature of goods and services provided by the taxable person according to the policy stated at GCC Agreement level as well as in the Implementing Regulations.
Payment of Tax due by a Taxable Person in respect of a Tax Period must be made by the last day of the month following the end of that Tax Period.
In order to access the VAT Law, please follow the link
The following eight-step guide details the requirements for VAT readiness. It is recommended that every large business follows the below steps to ensure a smooth implementation of VAT by 1st January 2018 (H1439/4/14).
How should businesses register?
In order to register for VAT, businesses must first be registered at GAZT for Zakat and Income Tax.
Some large companies, particularly those already registered for other forms of tax in Saudi Arabia, will be auto-registered for VAT by GAZT:
If your company is not auto-registered, registration is open since August 2017 to all eligible companies and businesses. You can register online on the following link: https://gazt.gov.sa then click on user login.
Courtesy: GAZT – SA
VAT in Odoo
Example of VAT with purchase and sale of particular product.
When we do purchase including VAT:
When we sell the same product with our margin including VAT to customer:
As Odoo have the capacity to provide all Saudi Arabia VAT requirements, this will be very simple and easy saudi vat software for small and medium companies. The user can scale any time the odoo system by customization to meet any requirements.
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