Conditions for adding VAT to commercial rentals

KDIPA clarifies the registration mechanisms, limits and procedures for imposing 15% on shop rentals.
Zakat, Tax and Customs Authority

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<The Zakat, Tax and Customs Authority has clarified the conditions and requirements for adding VAT on commercial rentals. VAT is an indirect tax levied on most goods and services, including shop rentals, according to specific criteria. <The Authority confirmed that commercial leasing is subject to VAT at a rate of 15% if the lessor is registered in the tax system. Anyone practicing an economic activity is required to register in the VAT system if their annual revenues reach 375,000 riyals or more. This limit includes all revenues collected from the sale of goods and services, without deducting any expenses.

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VAT registration limits

<The Authority clarified that establishments with annual revenues exceeding 375,000 riyals are required to compulsorily register in the VAT system. Businesses with annual revenues between SAR 187,500 and SAR 375,000 are eligible for voluntary registration. Organizations with revenues of less than SAR 187,500 are not required to register in the system.

For organizations with revenues of less than SAR 187,500, registration is not mandatory.

Steps to register for VAT

The Zakat, Tax and Customs Authority has indicated the procedures for registering in the VAT system as follows:

Logging in to the Authority's website. Navigate to the "Public Services" tab. Select "VAT Registration".
Fill out the registration form with the required data. Receive a notification containing the tax certificate after the application is completed.