VAT in Saudi Arabia expected to bring SAR35 billion in first year

Sheena Amos

RIYADH 3 January 2018: Saudi Arabia started on Monday applying the value-added tax as part of the country’s plans to boost revenue. The 5 percent tax will apply to a wide range of items, including food; clothes; electronics; petrol; phone, water and electricity bills; and hotel reservations.

Hamoud Al-Harbi, the project manager of VAT at General Authority of Zakat and Tax (GAZT), told the Emirates News Agency (WAM) that a total of SAR 35 billion in revenue is expected during the first year of applying the tax in the Kingdom.

The tax is imposed by Saudi Arabia within the framework of a unified agreement endorsed by the member states of the Gulf Cooperation Council (GCC). Saudi Arabia has already imposed the excise tax at 100 percent on tobacco products and energy drinks, and 50 percent on soft drinks.

The imposition of VAT will help to raise tax revenues of the Saudi government to be utilised for infrastructure and developmental works, he added, noting that VAT will contribute to address challenges and sustain growth.

He affirmed the punitive measures to be adopted strictly for those who have not registered so far, or who violate the laws. The Ministry of Commerce and Investment has announced that in cooperation with the General Authority for Zakat and Tax it will intensify inspection tours in markets and commercial firms across the Kingdom to track down irregularities during application of the VAT.