Saudi Arabia’s new value-added tax is expected to bring in SAR35bn ($9.3bn) during its first year, according to officials.
The project manager of VAT at Saudi Arabia’s General Authority of Zakat and Tax (GAZT), Hamoud Al Harbi, confirmed the figure to the UAE’s state news agency WAM, after the new tax was launched on January 1. The UAE and Saudi Arabia both introduced VAT at the same time on Monday, applying a 5 per cent tax to a range of items such as food, clothing, electronics, petrol, amenity bills and more.
The new tax was agreed by all Gulf Cooperation Council Countries, though so far the UAE and Saudi are the only nations to have implemented the levy. The remaining GCC countries are obliged to introduce their own VAT within 12 months, though reports suggest Oman and Kuwait will wait until 2019 to bring it into force.
Al Harbi also told WAM that VAT will help to raise tax revenues of the Saudi government, which will be used for infrastructure and developmental works. He added that VAT will contribute to address challenges and sustain growth.
Saudi Arabia has already introduced an excise tax of 100 per cent on tobacco products and energy drinks, and 50 per cent on soft drinks.
Al Harbi warned that punitive measures would be adopted strictly for those who have not yet registered for VAT, or who violate the laws. The Ministry of Commerce and Investment previously announced that – in cooperation with GAZT – it will intensify inspection tours in markets and commercial firms across the kingdom to track down irregularities during application of the VAT.
Source Credit: Gulf Business