8 goods and services that are exempt from Value Added Tax (VAT)

VAT in Saudi Arabia: The Government of Saudi Arabia imposed Value Added Tax (VAT) on January 1, 2018, at a standard rate of 5%. VAT is an indirect form of tax also called consumption tax, which is imposed on all goods and services whenever the value is added, from production to point of sale.

VAT is considered as a reliable source of revenue for state budgets and is currently implemented in more than 160 countries. The General Authority of Zakat and Tax (GAZT) is working to implement, control, and enforce VAT in Saudi Arabia.

Exceptions: Although the definition of VAT says that the tax is to be imposed on all goods and services but there are a few exemptions that the masses of the Gulf countries are not aware of as it is a new thing for them. The VAT is exempted on the following 8 goods and services.

01-Medicine and Medical Equipment: The suppliers who are authenticated by the Ministry of Health and Saudi Food and Drug Authority.

02-Gold and Silver: Gold and Silver which are 99% pure and tradable in the bullion markets are exempted from the VAT.

03-Goods Export: Exports to countries outside of the GCC are exempted from the VAT. Moreover, if a visitor in Saudi Arabia has purchased some items to be used back in their home countries, pilgrims can take refund of VAT paid on the Airport.

04-Life insurance: Exemption for life insurance and reinsurance contracts.

05-Government Agency services: Services provided by the Government such as issuance and renewal of passports and driving licenses are exempted from the VAT.

06-International Transportation: Traveling outside the country through any means, that is land, sea or air will have no VAT. This is the reason the tax of 5% is imposed on domestic tickets but there is no tax on the international tickets.

07-Selected Financial Services: Financial Services like Savings and deposit accounts, credit or credit guarantee provided by financial institutes have an exemption to the VAT. However, VAT is charged on all other services.

08-Residential Real Estate Rent: The Rented Residential property, whether it be a villa, studio flat or apartment will be exempted from the VAT. However, the VAT is charged on the rented property for commercial purposes.

Foreign Remittance: It is also important to mention here no Gulf Country including Saudi Arabia has imposed any kind of tax on foreign remittance. There were rumors that Saudi government will impose VAT on foreign remittance which turned out to be wrong. Right now, there is no VAT on foreign remittance.

Source: Destination KSA

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Steve has vast experience in writing about Saudi rules, regulations, guides, and procedures.