How to price services in Saudi Arabia using cost, margin and VAT
A sound price starts with your delivery cost and target margin. Then account for discount and VAT without exposing internal costs in the client quote.
1. Add the cost of delivering the service
Include labour, materials, transport and every recurring expense tied to delivery. If you omit a recurring cost, the margin may look healthy before delivery and shrink afterwards.
2. A 25% markup is not a 25% margin
If a service costs SAR 1,000 to deliver, markup and margin produce different prices:
25% markup on cost
Price before VAT: SAR 1,250.
Gross profit: SAR 250, which is a 20% margin on the sale price.
25% gross margin
Price before VAT: SAR 1,333.33.
Calculation: 1,000 ÷ (1 − 0.25).
This is an illustrative calculation from the entered cost. It is not net profit after every expense or a promise of sales.
3. Apply discount before VAT
Test the discount against the net price and make sure it does not push the price below cost. Review its effect on margin before sending a quote.
4. Add VAT when it applies
With 15% VAT, the SAR 1,333.33 example becomes SAR 1,533.33 after rounding. Treatment depends on registration and the supply; consult a qualified adviser if you are unsure.
Common mistakes
Copying a competitor's price
You do not know their cost, scope or acceptable margin.
Mixing margin and markup
The same percentage does not produce the same selling price.
Exposing internal cost
Keep the internal report separate from the client quote.
Preview the calculation, then choose what fits your work.
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