In one sentenceA mechanism in which the registered buyer calculates the VAT himself on services or goods bought from a non-resident supplier, instead of the supplier calculating it.
Simply put
The foreign supplier does not issue an invoice with Saudi VAT, so you calculate it: you record it as output VAT and input VAT at the same time.
If all your activity is taxable, the two sides are equal so you pay nothing in practice, but failing to record it is an error in the return.
Worked example
A factory bought a technical consulting service from a company outside the Kingdom worth 20,000 SAR.
Value of the service20,000 SAR
Output VAT calculated by the factory20,000 × 15% = 3,000 SAR
Input VAT it deducts3,000 SAR
Net effect on the return (fully taxable activity)3,000 − 3,000 = 0 SAR
Don't confuse it with
Withholding taxReverse charge is VAT calculated by the buyer, while withholding is income tax deducted from the amount paid to the non-resident. Both may apply to the same payment.