Physiotherapyshorts : VAT IN KSA

Saturday, June 4, 2016

VAT IN KSA

Update 20-MAR-2016: As per the MENA Tax Conference held last week in Dubai, all GCC member countries will implment VAT on the 1st of January 2018. Each member state is free to decide the percentage of tax which will vary between 3-5%.

Summary:

VAT to be between 3.5 - 5 %
Implementation time: 2-3 years
94 Food Items Exempt
Healthcare Exempt
Education Exempt

Is Saudi really Implementing Value Added Tax?

The short answer, yes! A recent agreement was reached by GCC member states in respect to Value Added Tax - VAT. The new taxes are to be implemented gradually with a soft deadline of 2018. All members will be implementing a 5% tax. According to top experts it is the best method of taxation that can be implemented. A flat out sales tax would be harder to implement and more detrimental to the economy. Yesterday in a surprise move the government increased cigarette prices by 10 percent.

The big question now is “when” not “if” VAT will be implemented, and, importantly, by which country (or countries) first.

Saudi Arabia VAT

Finance Minister, Ibrahim Akasaaf said the Kingdom expects to introduce VAT in two years aiming for the tax rate of around 5%. (Al-Hayyat New) If implemented it would still be one of the lowest VAT in the world. The Saudi government has already increased price for gasoline, water, and electricity. Due to budget deficits the Kingdom has already had to withdraw tens of billions of dollars from global investment funds, The Times reported.

Value Added Tax is considered an alternative source of income and may be the best of the worst!

How will this impact the common man?

The good news is, healthcare, education, and social services will be exempt from taxation. In addition, 94 food items will also be exempt from taxation. Don't be fooled, the tax will affect the working class and it will be felt. Already blue and white collar workers have had to cut down on luxuries due to the increase in utilities and gas prices. The implementation of VAT in Saudi will further tighten the disposable incomes of the middle class.