The Kingdom of Saudi Arabia (KSA) introduced Value Added Tax (VAT) w.e.f 1st January 2018. The tax authority decided to charge only a single VAT rate across the sale of goods and services. Initially, the VAT rate was 5%; however, to combat COVID-19, the Zakat, Tax and Customs Authority (ZATCA) has increased the standard VAT rate to 15% w.e.f 1st July 2020.
VAT invoicing rules in the KSA mandates taxpayers to issue a tax invoice, simplified tax invoice, or summary tax invoice based on the case. This article explains all about the VAT category code under KSA VAT.
ZATCA notified the VAT category codes to be mentioned in an invoice based on the type of goods or services such as standard rate, zero-rated, exempt etc.
The below table gives the list of VAT category codes to be used while creating invoices in KSA:
|Category of goods/services||VAT category code to be mentioned|
|Exempt from Tax||E|
|Services outside the scope of VAT or Supplies not subject to VAT||O|
Taxable supplies on which 15% VAT is charged fall under standard rate supplies. This category covers most supplies except zero-rated, exempted and out-of-the-scope supplies.
Zero-rated supplies are taxable; however, the rate is 0%. In future, the authority may charge the VAT rate. These include exporting goods and services, international transportation, and investment metals.
These supplies are exempt, i.e. no VAT is leviable. However, ZATCA may notify them as taxable supplies in future. These include notified financial services and qualifying residential estate.
These are the supplies that are kept out of the purview of VAT. These include:
ZATCA has also mandated quoting VAT category code and exemption reason code. The following table lists the exempted goods and services type and the codes to be mentioned while creating VAT invoices in KSA.
|Description of exempted/zero-rated goods/services||VAT category code to be mentioned||VAT exemption reason code to be mentioned|
|Financial services mentioned in Article 29 of the VAT Regulations||E||VATEX-SA-29|
|Life insurance services mentioned in Article 29 of the VAT Regulations||E||VATEX-SA-29-7|
|Real estate transactions mentioned in Article 30 of the VAT Regulations||E||VATEX-SA-30|
|Export of goods||Z||VATEX-SA-32|
|Export of services||Z||VATEX-SA-33|
|The international transport of Goods||Z||VATEX-SA-34-1|
|International transport of passengers||Z||VATEX-SA-34-2|
|services directly connected and incidental to a Supply of international passenger transport||Z||VATEX-SA-34-3|
|Supply of a qualifying means of transport||Z||VATEX-SA-34-4|
|Any services relating to Goods or passenger transportation, as defined in article twenty-five of these Regulations||Z||VATEX-SA-34-5|
|Medicines and medical equipment||Z||VATEX-SA-35|
|Private education to citizen||Z||VATEX-SA-EDU|
|Private healthcare to citizen||Z||VATEX-SA-HEA|