The Gulf Cooperation Council countries adopted the Value Added Tax (VAT) in 2016 and was applied in the Kingdom of Saudi Arabia for the first time in 2018 at a rate of 5% and during July 1, 2020, the VAT rate was raised to 15% and all companies and individuals in Saudi Arabia were obliged to register in the VAT system and pay it on their products if their sales exceed 375 thousand riyals annually.Calculating VAT may seem a bit complicated, but with Invest Global you can simplify this process and ensure you avoid fines and penalties. We will provide you with integrated solutions to help you understand VAT and how to calculate it accurately, file tax returns on time, and avoid any tax penalties or fines.

Innovative tax compliance solutions with Invest Global Calculate VAT easily:

VAT is based on the “tax on consumption” principle, where the final consumer bears the tax burden and businesses collect the tax from customers on their sales and then supply it to the government after deducting the tax they paid on their purchases of inputs.

Here are three essential tips for businesses to calculate VAT:

1. Accurate product categorization: The first and most important step is to accurately categorize all the company’s products so that we determine which products are subject to 15% VAT and which are exempt. Use an integrated accounting system that helps you keep track of these classifications easily.
2. Calculating input and output tax: Input tax is the VAT that the company pays on its purchases of goods and services used in its taxable business activities, while output tax is the VAT that the company collects from its customers when selling goods or providing taxable services. You must ensure that all purchase and sale invoices are properly recorded to calculate these taxes accurately.
3. Stay on top of tax regulations: Tax regulations are subject to constant change and updating, so be sure to follow the latest developments and updates of tax regulations issued by the General Authority for Zakat and Income Tax (GAZT). General Authority of Zakat and Income to ensure full compliance and avoid any fines.

VAT calculation methods:

There are two main ways:

1. Deduction Method: This is the common method of calculating the tax due on sales and then deducting the tax paid on purchases, which can be expressed by the following equation:

VAT due = (value of sales x tax rate) – (value of taxable purchases x tax rate)

1. Direct Value-Added Method: This method requires calculating the value added directly at each stage of production, as the value added is the difference between the value of the company’s sales and the cost of inputs, and then the tax rate is applied to the value added.

Don’t let tax penalties hold you back: Invest Global’s experts are here to protect you:

Entrepreneurs and SME owners often overlook the importance of tax compliance. Dealing with VAT negligently may lead to tax violations and fines that cause huge losses to your business and may lead to legal prosecutions that threaten the stability and growth of your business.
Invest Global understands the challenges businesses face in managing taxes and we strive to provide distinctive and customized accounting services that meet the needs of our clients.

Our services go beyond compliance

Not only do we help you avoid tax penalties, we also aim to help you improve your financial performance and maximize your profits by:

• Strategic tax planning: We help you develop a clear and integrated tax plan that fits your business goals and future aspirations.
• Prepare and file tax returns: We prepare and file your tax returns accurately and on time, saving you effort, time and money and ensuring full compliance.
• Tax audit: We thoroughly review your accounts and financial records for accuracy and completeness and identify any gaps or weaknesses that could lead to tax penalties or fines.
• Specialized tax consulting: We realize that every company has its own requirements and needs, so we provide effective solutions that suit the nature and size of your business and meet your specific needs.

Why choose our services:

• Extensive experience: We have extensive experience in the field of taxation in Saudi Arabia and have a specialized team of qualified experts who are familiar with the Kingdom’s tax laws and regulations.
• Comprehensive support: We provide comprehensive support in all areas of financialand tax consulting from registration to filing tax returns. We help you understand tax laws and regulations, identify taxable transactions, identify taxable goods, services and products, calculate input and output tax, and prepare the required tax reports.
• Minimize risks: We help you minimize the risk of tax non-compliance and avoid fines and penalties for violating tax regulations.

Don’t let VAT get in the way of your business growth. Contact us today at Invest Global for financial and tax consulting and let us help you achieve tax compliance. Our specialized team is ready to provide the support, advice and follow-up you need to succeed in the Saudi market.