A buyer in Saudi Arabia pays more than your quotation before your goods reach it. What it pays once they are cleared and delivered is the landed cost, and that is the figure it can set against what it pays today. Your quotation is only the first line of that sum.
This note sets out, from the published rules, what sits between the two figures in Saudi Arabia, with the Bahrain equivalents where they differ. It is written for a supplier abroad preparing a first price for a buyer in Bahrain or Saudi Arabia.
1. Your delivery term decides where your price stops
Your quotation covers the costs its delivery term gives to the seller, and every other cost of getting the goods to the buyer falls on the buyer.
- The Incoterms® 2020 rules, developed by the International Chamber of Commerce (ICC), set out which party carries each responsibility, including who bears customs duties. They do not change tariff rates or customs procedures. [1, §1]
- ZATCA, the Zakat, Tax and Customs Authority, describes these terms as showing which party bears the costs and risks of transporting the goods. It treats them as an indication of the parties’ legal relationship, not as proof of it. [4, §2(16)]
- ICC lists FOB and CIF as rules for sea and inland waterway transport only. For air or road freight, the rules to use are among those for any mode, such as FCA and CIP. [1, §3]
- ICC’s list of national barriers records that foreign transport insurance under CIF and CIP is allowed in Saudi Arabia only up to the point of entry, and is not allowed in Bahrain. [9]
| Delivery term | Transport | Export clearance | Import clearance | Pays import duty |
|---|---|---|---|---|
| EXW (Ex Works) | Any | Buyer | Buyer | Buyer |
| FCA (Free Carrier) | Any | Seller | Buyer | Buyer |
| FOB (Free On Board) | Sea and inland waterway | Seller | Buyer | Buyer |
| CIF (Cost, Insurance and Freight) | Sea and inland waterway | Seller | Buyer | Buyer |
| CIP (Carriage and Insurance Paid To) | Any | Seller | Buyer | Buyer |
| DAP (Delivered at Place) | Any | Seller | Buyer | Buyer |
| DDP (Delivered Duty Paid) | Any | Seller | Seller | Seller |
Source for the table: [1, §3].
ICC calls DDP the only rule under which the seller is responsible for the duties, taxes and import formalities in the destination country. Under every other rule, the import burden falls on the buyer. [1, §4]
What this means for a supplier. In our reading, a buyer who receives an EXW, FCA or FOB price will add freight, insurance, duty, import VAT and clearance before comparing it with anything. If you do not know what those lines come to, you do not know what your price looks like to the buyer.
2. Customs value starts from your price and adds the cost of reaching the port
Where duty in Saudi Arabia is a percentage, it is charged on the customs value: the price paid, plus freight, insurance and some other costs up to the port of arrival.
- Saudi Arabia applies the Common Customs Law of the GCC States, which leaves the method of valuation to its Rules of Implementation. [2, Art. 26; 4, §2(2)]
- The first basis is the transaction value: the price actually paid or payable for the goods sold for export. [2, Rules of Implementation, Art. 1]
- Freight, insurance and other related charges are added until the goods reach the port of destination. [2, Rules of Implementation, Art. 1(I)(5)]
- Where the buyer bears them and they are not already in the price, the value also includes commissions and brokerage (other than buying commission), packing, and licence fees or royalties the buyer must pay as a condition of the sale. [2, Rules of Implementation, Art. 1, first method]
- If your price runs past the port, as a DAP or DDP price to an inland place does, the transport after import and the importing country’s duties and taxes are not part of the customs value, provided they are shown separately from the price of the goods. [2, Rules of Implementation, Art. 1(I)(8); 10, Note to Art. 1, para. 3]
- Discounts agreed after the goods are imported do not reduce the customs value. [2, Rules of Implementation, Art. 1(I)(7)]
- ZATCA puts it simply: the customs declaration sets a transaction value made up of the value of the goods plus freight and insurance to the place of import. [4, §4.4]
- Under the GCC law, customs may ask for every invoice, contract and related document without having to accept what they state, and for an Arabic translation of invoices issued in another language. [2, Art. 27]
- ZATCA’s current controls require a detailed invoice, original or electronic, with the customs declaration. Clearance can go ahead without it if the declarant undertakes to provide it within 90 days of the guarantee lodged with the declaration. [11, Art. 5]
What this means for a supplier. On an EXW, FCA or FOB quotation, duty is charged on more than your price. Giving the buyer your freight and insurance to the port of arrival, or a CIF or CIP price where the insurance rules allow it, lets it work out the customs value before it orders.
3. The duty rate belongs to your tariff line
There is no single duty rate to plan with: the rate is set for each tariff line, so look up the line for your product.
- Imported goods pay the duties set in the customs tariff and any other applicable fees. [2, Art. 9]
- A rate can be a percentage of the value, a fixed amount per unit, or both. [2, Art. 10]
- As a rule, the rate that applies is the one in force on the date the customs declaration is registered. [2, Art. 13]
- In Saudi Arabia, ZATCA’s Integrated Customs Tariff service can be searched by word, HS heading or HS code. [5]
- In Bahrain, the Customs Affairs tariff finder shows each HS code with its duty rate and, where a permit is needed, the authority concerned. [6]
- Goods are released only once customs procedures are complete and the duties are paid, unless customs accepts a guarantee. [2, Arts. 63, 66]
4. Import VAT is charged on more than the customs value
In Saudi Arabia, import VAT is charged at the standard rate of 15% on the customs value plus customs duty, any excise tax and other charges.
- The standard VAT rate is 15% of the value of a supply or an import, unless a provision exempts it or applies the zero rate. [3, Art. 2(2)] The rate is the one that applies on the date of import. [3, Art. 18]
- The value of imported goods follows the customs rules. [3, Art. 15(1)] ZATCA quotes the VAT agreement Saudi Arabia ratified: the value is the customs value plus excise tax, customs duties and any other charges, excluding VAT itself. [4, §4.4]
- The customs declaration also carries fees ZATCA collects on behalf of transport and shipping companies, such as transport and storage fees. These are included when VAT is calculated. [4, §4.2]
- VAT at 15% applies to imported goods whatever their duty rate, and even when they are exempt from customs duty, apart from limited exemptions that ZATCA lists. [4, §4.1]
- Customs collects the VAT due on imports, a function ZATCA now holds. [3, Art. 28(1); 4, §1.2] It is paid with the duties and fees on the declaration before the goods are cleared. [4, §4.3]
Bahrain sets its own rate. Side by side:
| Saudi Arabia | Bahrain | Source | |
|---|---|---|---|
| Rate on imports | 15% standard rate | 10% standard rate | [3, Art. 2(2); 7, §1.1.4] |
| Value it is charged on | Customs value, plus excise tax, customs duties and other charges | Customs value, plus customs duties, excise tax and import costs not already in the customs value | [4, §4.4; 7, §1.1.6] |
| Who pays, and when | The importer, with the customs duties, before clearance | The importer as recorded by Customs Affairs, before release | [4, §4.3; 7, §1.1.5, §1.1.7] |
| Paying through the VAT return instead | A registered person can apply; conditions include monthly returns and on-time filing and payment over the past 12 months, or since registration if shorter | A registered importer can apply to defer it to its next return; the National Bureau for Revenue decides | [3, Art. 28(2); 4, §5.3; 7, §1.1.7] |
| Recovering it | Only the person acting as importer, holding the customs documents | A registered importer that used its own commercial registration and VAT number, with the customs documents | [4, §10.3; 7, §1.1.7, §1.1.8] |
What this means for a supplier. In our reading, an importer that can deduct import VAT still pays it at the border unless it has approval to account for it in its return, and a buyer that cannot deduct it carries it as a cost. Either way, it is charged on top of the customs value and the duty, not on your quotation.
5. From quotation to landed cost, line by line
Landed cost is the sum of these lines, and each one can be checked before the first order.
| Line | How it is worked out | Source |
|---|---|---|
| Your price | The amount on your quotation, at the point its delivery term names | [1, §3] |
| Freight and insurance to the port of arrival | Added if your price stops before the port | [2, Rules of Implementation, Art. 1(I)(5)] |
| Transport after import, and import duties and taxes | Left out if your price runs past the port and shows them separately | [2, Rules of Implementation, Art. 1(I)(8); 10, Note to Art. 1, para. 3] |
| Commissions, packing, licence fees | Added if the buyer bears them and they are not in the price | [2, Rules of Implementation, Art. 1] |
| Customs value | Your price taken to the port of arrival, after the lines above | [2, Rules of Implementation, Art. 1; 4, §4.4] |
| Customs duty | Customs value times the rate on your tariff line, or a fixed amount per unit | [2, Arts. 10, 13; 5] |
| Other charges on the declaration | For example, transport and storage fees collected by ZATCA | [4, §4.2] |
| Import VAT | 15% standard rate on customs value plus duty, excise tax and other charges (10% in Bahrain) | [3, Art. 2(2); 4, §4.4; 7, §1.1.4, §1.1.6] |
| Clearance and port charges | The customs broker’s fees; storage, handling and other service charges at the port | [2, Arts. 107, 108] |
| Conformity, where a technical regulation applies | In Saudi Arabia, a conformity certificate and a SABER shipment certificate for each shipment | [8] |
| Delivery to the buyer’s site | Inland transport after clearance | — |
| Landed cost | The sum, with import VAT recoverable only by an importer entitled to deduct it | [4, §10.3] |
For what conformity involves for one product group, see our note on selling building products into Saudi projects.
6. What to settle before you send a first price
Agree the delivery term, the importer, and who pays duty and VAT before the buyer sees a number.
- Delivery term. Name the Incoterms® 2020 rule and the place it applies to, so the buyer knows where your price stops. For air or road freight, choose a rule for any mode. [1, §3]
- Importer. Who will import? ZATCA requires the importer to be licensed to import into Saudi Arabia and, where its tax number is not filled in automatically, to identify itself with one of four identifiers, such as a commercial registration number or a 700 code. [4, §4.2]
- DDP. Under DDP, you carry out import clearance. [1, §3] In Saudi Arabia, that needs the import licence and identifier above. [4, §4.2] An importer that is not VAT-registered and holds no import licence can instead complete the import through an agent or representative, with duty and VAT still charged to the importer. [4, §5.5] In Bahrain, import VAT is payable by the importer recorded by Customs Affairs, and a registered importer must use its own commercial registration and VAT number. [7, §1.1.5, §1.1.7] Where a seller cannot carry out import formalities, or doing so is costly, ICC suggests DAP or DPU, which leave import clearance with the buyer. [9]
- Tariff line. Find your HS code and its duty rate on ZATCA’s tariff service, or on the Bahrain Customs Affairs finder. [5, 6]
- Customs value. Give the buyer what it needs to work out the customs value: your price, freight and insurance to the port of arrival, and any later transport shown separately. [2, Rules of Implementation, Art. 1; 10, Note to Art. 1, para. 3]
- Import VAT. Will the importer be VAT-registered and able to deduct import VAT? If not, it is a cost in the buyer’s sum. [4, §10.3; 7, §1.1.8]
- Invoice. Will a detailed invoice, original or electronic, go with the declaration, and can you supply an Arabic translation if customs asks for one? [2, Art. 27; 11, Art. 5]
- Conformity. If a technical regulation covers your product in Saudi Arabia, are the certificates in place, and who obtains the SABER shipment certificate for each consignment? [8]
- Clearance and delivery. Who clears the goods, and who pays the port charges and delivery to site? In Saudi Arabia, only the owner of commercial goods or a licensed customs broker may complete their clearance. [2, Art. 110; 11, Art. 40(2)]