VAT on travel agency commission in Saudi Arabia.

ZATCA’s guideline for agents says a travel agent can act either way, and that the VAT treatment depends on the circumstances of each case and the capacity the agent acts in.

When you sell as principal, VAT follows what you sell, at its full price:

• International passenger transport, to or from a place outside the Kingdom, is zero-rated.
• Passenger transport within the Kingdom is standard-rated at 15% when it is not part of an international journey.
• Hotel stays in the Kingdom are standard-rated at 15%, including for guests and companies from abroad.
• Hotels outside the Kingdom are outside the scope of Saudi VAT.

Saudi VAT has no special margin scheme for travel, so a principal’s sale is treated on its full value, not on its margin.

As a disclosed agent, the main supply goes straight from the airline or hotel to the traveller, and your agency’s supply is its service to that principal, paid as commission. ZATCA treats that commission as a separate supply of services.

You may deliver, invoice or collect payment for the principal, provided you act in the principal’s name and the agency relationship is disclosed. An agent may also issue the tax invoice on the principal’s behalf when the conditions in Article 53(3) of the VAT Implementing Regulations are met; the principal stays responsible for it.

• Commission from a principal resident in the Kingdom is subject to VAT at 15%, whether or not the main supply is itself taxed.
• Commission on an international ticket: ZATCA states that a separate fee charged as commission for zero-rated international travel is consideration for a service separate from the transport, and is not subject to VAT at the zero rate.
• Commission from a principal outside the GCC, such as a foreign airline: services to a customer with no residence in the GCC can be zero-rated under Article 33, unless one of its exceptions applies. ZATCA gives no example for airline commission, so check the conditions in its guideline for non-GCC residents, and for certainty ask ZATCA for an interpretative decision.

If you buy or sell in your own name on behalf of someone else, without disclosing the agency, Article 9 of the VAT Law treats you as having bought and supplied the service yourself. VAT then follows the full sale, as for a principal.

A cost you pay in the customer’s name is a disbursement, with no VAT added by you, when all five conditions are met:

1. the customer receives the supply;
2. the customer is responsible for paying for it;
3. the customer knows of and authorises the payment;
4. you charge it on with no mark-up;
5. it is shown separately on your invoice.

A cost you incur in your own name and recharge is part of your own taxable supply.

Commission invoiced to an airline, hotel or other business is a business-to-business sale, so it is a standard tax invoice: cleared by ZATCA before it is shared once you are in Phase 2, issued by the 15th of the following month, in Arabic, with the VAT amount shown in riyals. Our ZATCA e-invoicing guide covers what the invoice must show.