VAT in Saudi Arabia

Updated 2022-03-03 12:18

Value Added Tax was first introduced in Saudi Arabia in 2018 at the rate of 5%. As of July 2020, it has been increased to 15%.

The VAT (value-added tax) on all goods and services in Saudi Arabia is still much lower than many expats are accustomed to in their home countries. Still, it's important to ensure that you fully understand what it entails. The once tax-free state of Saudi Arabia has changed, with the introduction of the 15% VAT, applied to all goods and services purchased.

VAT is an indirect tax, already applied in more than 160 countries around the world as a reliable source for state budgets. VAT is imposed at each stage of the supply chain, from the production and distribution to the final sale.

You will find VAT applied to your grocery bill at all supermarkets and stores. Utilities such as water, electricity, Internet, landlines are taxed at the standard 15%. Other daily expenses like taxi transportation and bus rides included.

Many shops and restaurants have included the additional tax into their prices as well. Places like Starbucks and Krispy Kreme have notified their customers that they will be taking care of the VAT, so no changes will apply to their customers, while others have raised their prices slightly to adjust to the VAT. Overall, both fast food and dining restaurants have included VAT on their bills.

Note that things like tuition fees for private schooling as well as services at private healthcare facilities are also taxed 15%. It is common for many expats to have health insurance provided by their employers, so they might not face the added tax on insurance premiums.

Good to know:

Check if you are eligible for VAT refunds on the General authority of zakat and taxes webpage.


It's important to note that Saudi Arabia is still income tax-free, so even though you may pay a little tax on goods and services, your salary is still not taxable.

With most things now subject to the VAT, the government has stated that there are a few things that will remain the same. We've listed below the specific goods and services that will remain tax-free.

VAT exemptions in Saudi Arabia

No VAT applies to the following:

  • Income (salary, bonuses, stipends)
  • Rent (residential and student housing)
  • Banking (debits, transfers, deposits)
  • Government fines (driving tickets, license renewals, permits, etc.)
  • Medical equipment
  • Medicine (vitamins, over-the-counter drugs, supplements)

Useful link:

Government of Saudi Arabia - VAT

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