Zakat and VAT for New Companies in Saudi Arabia: A Starter Guide

One of the first questions new business owners ask is which taxes apply and when to register. Understanding your obligations to ZATCA early avoids fines and gives you a clear view of your costs.

Zakat or income tax?

• Zakat: applies to the shares of Saudi and GCC partners, at 2.5% of the zakat base.
• Income tax: applies to the shares of foreign partners in resident companies.
• A mixed company pays zakat on the Saudi/GCC share and income tax on the foreign share.

VAT

• The standard rate is 15% on most goods and services.
• Registration is mandatory above SAR 375,000 of annual taxable supplies and voluntary from SAR 187,500.
• Returns are filed monthly or quarterly depending on company size.

E-invoicing (Fatoora)

VAT-registered businesses must issue electronic invoices from a ZATCA-compliant system, and the integration phase is being rolled out to businesses in waves announced by ZATCA.

Common mistakes

• Registering for VAT late after passing the mandatory threshold.
• Invoices missing required fields.
• Mixing personal and company expenses.
• Missing the annual zakat or tax return deadline.
• No regular bookkeeping to support returns.

How Rayat Najd helps

We handle bookkeeping, financial statements, ZATCA registration and timely zakat and tax filings. See our accounting services or contact us.

Note: this article is general guidance; rules and thresholds may be updated by ZATCA, so we review your company's situation before any action.