Taxable and Exempt Goods and Services Under VAT in Saudi Arabia

Posted on :
22 October 2026

Author :
Ghofran Adel

Reviewed By :
Mohamed Naeem

Zero-Rated and Exempt Goods and Services

Key Summary

The article explains VAT in Saudi Arabia, including the standard 15% VAT rate and the general rule that most goods and services are subject to VAT unless a specific exemption or exception applies.
It explains the difference between taxable, exempt, and zero-rated supplies. Taxable supplies are generally subject to 15% VAT, zero-rated supplies are taxed at 0% while allowing input VAT recovery, and exempt supplies do not allow the supplier to recover related input VAT.
The article highlights key goods and services that are exempt from VAT or outside its scope, including certain residential real estate transactions, public education and healthcare, selected financial services, some government services, and specific insurance products.
It lists common goods and services subject to the 15% standard VAT rate, such as food products, domestic transportation, commercial property rentals, private education and healthcare, telecommunications, petroleum products, insurance products, and various professional and brokerage services.
The article explains zero-rated supplies in more detail, covering eligible exports outside the GCC, international transportation, certain medicines listed by the Ministry of Health, and qualifying investment metals.
It clarifies the practical difference between exempt and zero-rated supplies, particularly the ability of businesses making zero-rated supplies to deduct or recover VAT paid on related purchases and inputs.
The article introduces Daftra as a VAT management tool that lets businesses assign the right VAT treatment to products and services and automatically calculates VAT on sales and purchase invoices.
It also explains how Daftra's tax reports help businesses monitor VAT by showing input VAT, output VAT, and the resulting balance, along with summarized and detailed VAT return information based on recorded transactions.

Taxable and Exempt Goods and Services

Taxable supplies fall into two groups: those subject to the standard rate of 15%, and those subject to the zero rate of 0%.

As a general rule, all goods and services in the Kingdom are subject to 15% VAT unless a specific exception applies. Food products, pharmaceutical manufacturing, crops and agricultural output, and domestic transport, among many others, are all subject to VAT on both sales and purchases.

Distinguish between exempt and zero-rated supplies. Exempt supplies can only be made taxable by amending the relevant tax law, and the supplier cannot recover the input VAT paid on related purchases or raw materials. Zero-rated supplies, by contrast, follow the standard VAT rules: they are reported on tax invoices, and the supplier can recover the input VAT paid. ZATCA could also change the zero rate in the future. In practice, zero-rated supplies are therefore treated much more like taxable supplies than exempt ones.

Goods and Services Exempt from VAT in Saudi Arabia

Real estate

The sale of residential property by the owner or a relative is outside the scope of VAT.
Residential rental is exempt.
When a citizen buys their first home, the State bears the VAT on the first SAR 850,000 of the price; the citizen pays VAT on any amount above that.

Education

Public education is outside the scope of VAT.
For citizens enrolled in private education, the State covers the VAT on their behalf.

Healthcare

Services provided by public health facilities are outside the scope of VAT.
For private healthcare services used by citizens, the citizens bear the VAT themselves.

Financial services

Current and savings accounts are exempt.
Life insurance is exempt.
Interest on loans, including credit cards, is exempt.
Financing charges, including lease financing, are exempt.
The issuance and transfer of bonds and securities are exempt.
Financial products based on profit margins are exempt.

Government services

Employee salaries are outside the scope of VAT.
Supplies within a single VAT group are exempt.
Public services provided by government entities that are not an economic activity, such as renewing official documents.

General insurance

Insurance of property located outside the Kingdom is outside the scope of VAT.
Engineering insurance for property outside the Kingdom is outside the scope of VAT.

Protection and savings insurance

All kinds of protection insurance are exempt, including individual protection, individual protection-and-savings, group protection, and group protection-and-savings policies.

Goods and Services Subject to VAT

Most goods are subject to VAT at 15%, according to the ZATCA portal. The main examples are:

Food products
Domestic transport
Commercial property rental
Private education
Healthcare in private medical facilities
Petroleum products and domestic gas
Gold, silver, and platinum supplied for investment purposes with purity below 99%
Wired and wireless telecommunications and electronic services
Commissions, commercial discounts, and brokerage fees
Insurance products, including health insurance
Sale of goods recovered through an insurance policy
Consulting and administrative services related to supplies

Whether your sales are subject to 15% or 0% VAT, Daftra's E-Invoicing Software helps you issue ZATCA-compliant invoices and manage VAT accurately.

Zero-Rated Supplies

Besides exemptions, some supplies are subject to VAT at 0%, known as the zero rate. The key difference is this: a business making exempt supplies cannot deduct the input VAT it paid on purchases directly related to those sales, whereas a business making zero-rated supplies can recover or deduct the input VAT it paid on the inputs for those goods and services.

The main zero-rated supplies are:

Exports outside the GCC

Goods exported to non-GCC countries are zero-rated. Goods exported to GCC countries are subject to the standard 15% rate.

International transport

Everything related to international transport is zero-rated, including freight and passenger fares, the means of transport themselves (vehicles and equipment), and related services.

Medicines on the Ministry of Health's official list

Any medicine registered on the Ministry of Health's official list is zero-rated.

Investment metals

Investment metals are zero-rated in two cases:

It is the first supply by the producing business.
The metal's purity is at least 99%.

The infographic below summarizes the goods and services that are not subject to the standard 15% rate, whether fully exempt or zero-rated.

Daftra: The Easiest Way to Calculate VAT and File Your Return in One Step

Daftra helps businesses in Saudi Arabia calculate all types of taxes, including VAT, on sales and purchase invoices in a few simple steps. When adding a product, you can specify whether it is subject to VAT by selecting it as the primary (or first) tax on that item.

Daftra then automatically includes VAT on every sales or purchase invoice for that product or service.

Not only that: every sales or purchase invoice you record flows straight into Daftra's tax report, which shows your input VAT, output VAT, and the difference between them in real time. This tells you how much you owe ZATCA or how much you can reclaim.

Daftra can display your VAT return in summary or in detail, listing every sales and purchase invoice issued during the period.

You can start creating VAT-compliant invoices more easily and quickly than before, and prepare your full tax report in one step by signing up for a free Daftra account.

Manage Taxable and Exempt Transactions with Daftra

Sign up for free

Taxable and Exempt Goods and Services Under VAT in Saudi Arabia

Table of contents:

Key Summary

Taxable and Exempt Goods and Services