Royal Decree M/79 — Mandatory Integrated with ZATCA invoicing automatically
Municipality Tax —
Automatically Calculated in the Correct Order
5% for 5-star and above. 2.5% for below 5-star. Always calculated before VAT — in the exact order Saudi law requires. Wrong order = understated VAT = ZATCA clearance failure.
Correct cascade always enforced
Star rating sets rate automatically
Separate line item on ZATCA invoice
★★★★★
5-Star & Above
5%
Royal Decree M/79 — Luxury and upper-upscale hotels
★★★★★
Below 5-Star
2.5%
Royal Decree M/79 — Economy and midscale hotels
Mandatory Calculation Order
The Correct Cascade — Five Steps
Saudi law specifies a strict calculation order for municipality tax and VAT. This order cannot be reversed.
✓ Correct — 5-Star Hotel (5%)
1
Net Room Rate
SAR 1,000
↓
2
Municipality Tax 5%
+ SAR 50
↓
3
VAT Base (Taxable Amount)
SAR 1,050
↓
4
VAT 15%
+ SAR 157.5
↓
5
Total Amount
SAR 1,207.5
✗ Wrong — VAT First
1
Net Room Rate
SAR 1,000
↓
2
VAT 15% on net rate only
+ SAR 150
↓
3
Municipality tax after VAT
+ SAR 57.50
Understated VAT — potential ZATCA violation
Scope of Application
Municipality Tax: Room Accommodation Only — Not Other Services
Room accommodation (all rate types)
Room service — food
Minibar
Spa & Wellness
Parking
Laundry
Day use (charged as room stay)
No-show charges
Cancellation fees (if room-based)
Agent commissions
Common Mistakes
Four Common Municipality Tax Calculation Mistakes
Sutahi prevents all of these automatically. But if you're calculating manually or using another system, these are the mistakes to avoid.
Wrong
Calculate VAT first, then add municipality tax
Correct
Municipality tax first, then VAT on the combined base
Understated VAT — potential ZATCA clearance failure
Wrong
Apply municipality tax to F&B charges
Correct
Municipality tax applies to room accommodation only
Overcharging the guest — potential legal exposure
Wrong
Embedding municipality tax in the net room rate
Correct
Municipality tax as a separate line item on the invoice — ZATCA requirement
Incomplete ZATCA invoice — clearance rejection
Wrong
Applying wrong rate (5% on a 3-star hotel)
Correct
Sutahi reads star rating from property setup and applies the correct rate automatically
Over or under-charging — difficult to audit over time
Frequently Asked Questions
Municipality Tax Questions
Correct Municipality Tax Calculations — Automatic on Every Booking
Sutahi applies the correct cascade automatically. No manual calculations. No errors. No ZATCA issues.