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May 15, 2026

This ZATCA guideline provides clarification on the rules for deducting Value Added Tax (VAT) on purchases, known as input tax, in the Kingdom of Saudi Arabia. It details the conditions for eligibility, including the requirement for costs to be linked to taxable economic activities. The guide explains the categories of input tax (supplier VAT, reverse charge, imports) and outlines specific restrictions on deduction for items like entertainment and certain motor vehicles. It also covers documentation, timing, and the proportional deduction method for businesses making both taxable and exempt supplies, primarily clarifying Articles 49, 50, and 51 of the VAT Implementing Regulations.

Input Tax Deduction

Special Guideline | ZATCA

July 2020

The Zakat, Tax and Customs Authority ("ZATCA", "Authority") has issued this Guide for the purpose of clarifying certain tax treatments concerning the implementation of the statutory provisions in force as of the Guide's issue date. The content of this Guide shall not be considered as an amendment to any of the provisions of the Laws and Regulations applicable in the Kingdom.

Furthermore, the Authority would like to highlight that the clarifications and indicative tax treatments prescribed in this Guide, where applicable, shall be implemented by the Authority in light of the relevant statutory texts. Where any clarification, interpretation or content provided in this Guide is modified - in relation to unchanged statutory text - the updated indicative tax treatment shall then be applicable prospectively, in respect of transactions made after the publication date of the updated version of the Guide on the Authority's website.

1. Introduction

1.1. Implementing a Value Added Tax (VAT) System in the Kingdom of Saudi Arabia
1.2. Zakat, Tax and Customs Authority
1.3. What is Value Added Tax?
1.4. This Guideline

2. Definitions of Main Terms Used

3. Economic Activity and VAT Registration

3.1. Who Carries Out an Economic Activity?
3.2. Mandatory Registration
3.3. Optional VAT Registration

4. Categories of Input Tax

4.1. General Provisions
4.2. VAT Charged by Suppliers on Goods or Services Supplied in the KSA
4.3. Reverse Charged VAT
4.4. VAT Paid on Imports

5. Eligibility for Deduction

5.1. Non-Economic Activities
5.2. Taxable Supplies
5.3. Taxable Persons Carrying on Fully Taxable Activities

6. Deduction of General Overheads and Non-Attributable Costs

7. Restricted Input Tax

7.1. Private Use
7.2. Restricted Categories of Goods or Services
7.3. Prohibited Goods

8. Documents to Support Deduction

8.1. Alternative Evidences/Documents
8.1.1. Non-Arabic Invoicing

9. Timing for VAT Deduction

9.1. Standard Timing
9.2. Deduction in Subsequent Tax Periods

10. Adjustment of Input Tax Deduction

10.1. Change to the Consideration Payable
10.2. Non-Payment
10.3. Theft, Damage or Loss
10.4. Capital Assets

11. Special Cases

11.1. Pre-Registration VAT
11.2. VAT Incurred in Other Countries

12. Proportional Deduction

12.1. Apportionment Between Economic and Non-Economic Activities
12.2. Apportionment Between Taxable and Exempt Activities
12.3. Default Method
12.4. Annual Calculations and Adjustments

13. Use of Alternative Methods

13.1. Alternative Proportional Methods
13.2. Applying for Alternative Method
13.3. Direction by ZATCA to Use Alternative Method

14. VAT Relating to Incidental Activities

Contents