Foreign services: 4 reverse charge steps

The earlier lessons in this track dealt with a Saudi supplier issuing you a tax invoice, and with you invoicing your own customers. But many businesses pay suppliers outside the Kingdom every month: accounting or design software subscriptions, paid ads, website hosting, or advice from a firm abroad. Those invoices carry no Saudi VAT, so owners assume they sit outside the return. Usually the opposite is true.

What reverse charge means

Under the VAT Law and its Implementing Regulations published by the Zakat, Tax and Customs Authority, when a supplier not resident in the Kingdom supplies a service to a taxable person resident in it, the recipient becomes responsible for accounting for the tax instead of the supplier. You charge output VAT to yourself at the standard 15% rate, then you may deduct it as input VAT if the service is used for taxable supplies and the normal deduction conditions are met. The authority's published text always governs; this is a practical simplification.

Situation	Practical treatment
Supplier abroad, no Saudi VAT on the invoice, and you are VAT-registered	Reverse charge: output VAT and input VAT in the same return
The foreign supplier's invoice shows Saudi VAT and a Saudi VAT number	Do not account for it again; treat it like a local supplier invoice once you have checked it
Goods arriving through customs	VAT is collected at import under customs procedures, and is outside this lesson
Supplier inside the Kingdom issuing a normal tax invoice	Ordinary input VAT, as in the input VAT lesson

The practical rule: no VAT on a foreign supplier's invoice does not mean the transaction is VAT-free. It means the calculation has moved to you.

A concrete example: a subscription paid by card

An online store owner pays for a design tool from a US company, and messages the system after the card is charged:

Paid 200 dollars today for the design software subscription, invoice is from the US and has no VAT on it

The system does not just log an expense. It checks and proposes the entry:

The supplier is outside the Kingdom and its invoice shows no Saudi VAT number, so this is a reverse charge transaction. In riyals that is 750 at the 3.75 peg, and the VAT you account for is 112.5 riyals of output tax, with the same amount as deductible input tax because the tool is used in your taxable business. Send a photo of the invoice so I can attach it to the entry. The transaction will appear in this period's return under imports subject to reverse charge.

Here the net cash effect is zero, but the effect on the return is not: the transaction must appear. That is why accounting from your phone helps here. The information is recorded the moment you pay instead of being discovered while preparing the return.

4 steps for every foreign invoice

Identify the supplier: is it resident outside the Kingdom, and does its invoice show Saudi VAT and a Saudi VAT number? The answer picks the row in the table.
Convert to riyals: at the exchange rate the authority's guidance requires on the date the tax becomes due, and keep the rate source with the entry.
Record both sides together: output VAT and input VAT in the same period, and do not deduct the input side if the service serves an exempt activity or personal use.
Attach the evidence: the supplier invoice and the payment receipt, which are your proof in an authority audit.

Where it usually goes wrong

The most common mistake is booking foreign subscriptions as an unclassified card expense, so they never reach the return at all. The second is self-accounting for VAT on a foreign supplier that has registered in the Kingdom and already charged it, so you pay twice. The third is deducting the full input VAT on a service used partly for an exempt activity. See the VAT return lesson to see where these lines sit before you file.

Checklist

List every foreign supplier you pay regularly: subscriptions, ads, hosting, consulting.
Classify each company card payment when it happens, not at month end.
Check each foreign supplier's invoice: does it carry Saudi VAT or not?
Keep the exchange rate used, and its source, with every entry.
Before filing, compare total card payments abroad with what you recorded as reverse charge.

Summary: a service your registered business buys from a supplier outside the Kingdom, with no Saudi VAT on the invoice, is usually subject to reverse charge. Account for 15% output VAT yourself, deduct it as input VAT if the service serves taxable activity, convert to riyals, and keep the invoice. The risk is not the tax itself but a transaction that never shows up in the return.