VAT made simple: who actually pays it?

VAT is ultimately borne by the final consumer; the business collects it and remits it to the Authority.

How does it work?

• When selling, the business adds 15% to the price and collects it from the customer. This is output VAT.
• When buying, the business pays 15% to its suppliers. This is input VAT.
• In the return, the business remits the difference between the two to the Authority.

Example

You bought goods for SAR 1,000 and paid SAR 150 in VAT, then sold them for SAR 1,500 and collected SAR 225 in VAT. You remit only SAR 75 to the Authority — the tax on the value you added.

When does it become a burden on the business?

• If you don't collect the tax from the customer because of a pricing mistake.
• If you lose the right to deduct input VAT for lack of a valid tax invoice.
• If you file or pay late and incur penalties.