Tax Category
Tax Categories allow you to classify customers and suppliers based on how tax applies to them. This is essential for proper VAT treatment in Saudi Arabia.
Common Tax Categories
| Category | Description |
|---|---|
| Registered | Businesses registered for VAT (applies VAT on invoices) |
| Unregistered | Businesses not registered for VAT |
| Consumer | End consumers (VAT applies) |
| Overseas | Foreign customers/suppliers (VAT may not apply) |
Creating a Tax Category
- Go to Accounting > Tax Category and click New.
- Enter a Title (e.g., "VAT Registered", "VAT Exempt").
- Click Save.
Assigning Tax Categories
- Customer: Set the tax category on the Customer master to determine if VAT is charged on their invoices.
- Supplier: Set the tax category on the Supplier master to determine how input VAT is treated.
- Item: Set a tax category if specific items have different tax treatment (e.g., exempt items).
How Tax Categories Work with Tax Rules
Tax Rules use Tax Categories to determine which tax template to apply. For example:
- If Customer is "Registered" → Apply 15% VAT
- If Customer is "Overseas" → Apply 0% VAT (zero-rated export)
Saudi VAT Categories
Configure these for Saudi VAT compliance:
- VAT Registered (15%): Standard VAT rate for registered businesses
- VAT Exempt: For exempt supplies (financial services, residential rent, etc.)
- Zero-Rated: For exports and specific zero-rated supplies
- Outside Scope: For transactions outside VAT scope