Saudi Arabia’s General Authority of Zakat and Tax will publish the value-added tax (VAT) draft on its electronic portal within the next two weeks, Reuters reports, citing local media reported.
The General Authority for Zakat and Tax announced on Sunday that the implementation of 5% VAT starting January 2018 “will have no exceptions.” This 5% is significantly lower than the OECD average VAT rate of approximately 19%. According to the Arabic newspaper Okaz, the executive list of the tax will be complete in the third quarter of 2017, and companies will be able to start registering in the fourth quarter of the year.
The six members of the GCC signed a VAT Framework Treaty, which acts as the basis for the domestic VAT legislation in Saudi Arabia “by stipulating certain principles, which must be followed by all members, while allowing Saudi Arabia to opt for different VAT treatments in relation to some supplies,” according to Deloitte, who did a study on the move.
Deloitte noted that the VAT will impact most if not all industries in Saudi Arabia, but would have particular impact on consumer and industrial products, technology, media and telecommunications, financial services, and real estate.
The move is in line with an International Monetary Fund recommendation for Gulf states to impose revenue-raising measures including excise and value added taxes to help their adjustment to lower crude oil prices which have slowed regional growth.
