In November 2016, Saudi Arabia signed the Gulf Cooperation Council (GCC) value-added tax (VAT) Framework Agreement (the Framework) along with all other GCC member states. The Framework requires all member states to introduce VAT and establish national legislation, within the agreed parameters.

Any individual or legal entity which conducts economic activity to generate income (i.e. they sell goods or services which are considered taxable) must register for VAT purposes.

VAT is calculated as a percentage of the sale price of goods and services. As per the Framework, one of two rates will apply, depending on the type of goods or services being sold, either 5% (standard rate) or 0% (zero-rated).

VAT is still under the legislation. It is anticipated that Saudi will announce Value Added Tax (VAT) law and its Executive regulation in the near future.