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July 1, 2026

This Guideline, issued by the Zakat, Tax and Customs Authority in May 2026, details rules for recovering input tax under Saudi Arabian tax legislation. It provides administrative guidance on implementing the Unified VAT Agreement, the KSA VAT Law via Royal Decree No. M/113, and clarifying Article 40, Article 49, Article 50, Article 51, and Article 52 of the Implementing Regulations. The document details rules on domestic supplies, the reverse charge mechanism, importations, and calculations for partial proportional deduction of overhead costs between taxable and exempt activities, assisting taxable persons to optimise statutory compliance.

Input Tax Deduction under VAT Provisions

Third Version | May 2026

1. Introduction

1.1. Implementation of the 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

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 Documents/Evidences
1. 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. Loss, damage, or theft
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 an Alternative Method
13.3. Direction by Zatca to Use Alternative Method

14. VAT Relating to Incidental Activities

15. VAT Obligations of Taxable Persons

15.1. Issuing Invoices
15.2. Filing VAT Returns
15.3. Keeping Records
15.4. Certificate of Registration Within the Vat Law
15.5. Correcting Past Errors

16. Penalties

17. Request for an Interpretative Decision (Tax Ruling)

18. Contact Us

19. FAQs

Note: The English version is for guidance purposes only. In case of any discrepancy between the Arabic and English versions, the Arabic version shall prevail

The Zakat, Tax and Customs Authority has issued this Guideline to clarify certain treatments related to the implementation of the statutory provisions in force on the date of its issuance. The content of this Guideline shall not be deemed an amendment to any of the laws and regulations in force in the Kingdom of Saudi Arabia.

Contents