Below: both formulas with worked examples, zero-rated vs exempt supplies, how output and input VAT net off, and when returns are due.
The formulas
| You want | Formula | Example on SAR 1,000 |
|---|---|---|
| VAT on a net price | Net × 0.15 | 1,000 × 0.15 = 150 |
| Total including VAT | Net × 1.15 | 1,000 × 1.15 = 1,150 |
| VAT inside an inclusive price | Gross × 15 ÷ 115 | 1,150 × 15 ÷ 115 = 150 |
| Net price from an inclusive price | Gross ÷ 1.15 | 1,150 ÷ 1.15 = 1,000 |
Example 1: adding VAT
A maintenance job priced at SAR 2,400 before VAT:
- VAT = 2,400 × 0.15 = SAR 360
- Invoice total = 2,400 + 360 = SAR 2,760
Example 2: extracting VAT
A product advertised at SAR 1,255 including VAT:
- VAT = 1,255 × 15 ÷ 115 = 163.696… → SAR 163.70
- Net = 1,255 − 163.70 = SAR 1,091.30
Rounding: VAT is shown in riyals and halalas, rounded to the nearest halala, and the rounded invoice figures must be the ones you report in the return. The classic mistake is taking 15% of the inclusive price (1,255 × 15% = 188.25), which overstates the VAT.
Check your numbers with the VAT calculator.
Output VAT vs input VAT
- Output VAT: the VAT you charge customers on taxable sales.
- Input VAT: the VAT you pay suppliers on purchases and expenses for your taxable business.
- Net VAT payable = output VAT − deductible input VAT.
Example 3: one quarter for a small business
| Item | Net amount (SAR) | VAT 15% |
|---|---|---|
| Taxable sales | 200,000 | 30,000 (output) |
| Taxable purchases and expenses | 120,000 | 18,000 (input) |
| Net payable to ZATCA | SAR 12,000 |
If input VAT exceeds output VAT in a period, you end up with a credit instead. Input VAT is only deductible with valid evidence — a tax invoice, or a correctly issued simplified invoice. See tax invoice vs simplified invoice.
Discounts, returns and bad debts
Discount on the invoice: VAT is calculated on the amount after the discount. Example: goods worth SAR 5,000 with a 10% discount:
- Net after discount = 5,000 − 500 = SAR 4,500
- VAT = 4,500 × 0.15 = SAR 675
- Total = SAR 5,175
Changes after the sale: if a supply is cancelled, goods are returned or the agreed price changes after the invoice was issued, you do not edit the original invoice. You issue a credit note, which reduces output VAT in the return for the period in which the change happened or the credit note was issued, whichever is later. Example: a customer returns goods worth SAR 1,000 net — the credit note is SAR 1,150 and output VAT falls by SAR 150.
Bad debts: if a customer never pays for a supply on which you already declared and paid VAT, the law allows you to reduce output VAT by the tax on the unpaid amount, subject to conditions in the Implementing Regulations.
Zero-rated vs exempt
| Zero-rated (0%) | Exempt | |
|---|---|---|
| VAT charged to the customer? | No (0%) | No |
| Is the supply taxable? | Yes, at zero | No |
| Can you recover related input VAT? | Yes | No |
| Examples in the Implementing Regulations | Exports of goods, international transport, qualifying medicines and medical goods, investment gold, silver and platinum (99% purity or more) | Certain financial services and life insurance, residential leases, supplies of real estate |
Each category has detailed conditions — exports, for example, need proof that the goods left the Kingdom, otherwise the standard 15% applies.
Registration and returns
| Item | Rule |
|---|---|
| Mandatory registration | Taxable supplies above SAR 375,000 over 12 months |
| Voluntary registration | Taxable supplies or expenses above SAR 187,500 over 12 months |
| Monthly returns | Taxable supplies above SAR 40 million in the previous twelve months |
| Quarterly returns | Everyone else |
| Filing and payment deadline | End of the month after the period (e.g. the Q2 2026 return was due 31 July 2026) |
| Late filing penalty | 5% to 25% of the tax that should have been declared |
Steps to work out your return
- Collect the period's sales invoices and split standard-rated, zero-rated and exempt sales.
- Total output VAT from the invoices, net of credit notes.
- Collect valid purchase and expense invoices and total the deductible input VAT.
- Exclude input VAT that relates to exempt supplies.
- Compute the net figure, then file and pay before the end of the following month.
Summary
VAT = net × 15%; total = net × 1.15; VAT inside an inclusive price = gross × 15 ÷ 115. What you pay ZATCA is output VAT minus deductible input VAT — and remember that zero-rating keeps your right to deduct while exemption does not. File monthly above SAR 40 million of taxable supplies, quarterly otherwise. More on Ehsebly in the Kingdom on our Saudi page; for other markets see the Egypt VAT guide and the UAE VAT guide.