The 5% value-added tax (VAT) has now been officially implemented since yesterday, 1st January, in Saudi Arabia and the United Arab Emirates.
According to Arab News, the tax is imposed by both countries within the framework of a unified agreement that’s endorsed by the GCC.
BBC report states that the UAE estimates that the VAT’s income for the first year will be around $3.3 billion. Alternatively, Saudia Arabia expects a total of $9.3 billion in revenue during its first year.
The VAT will be on the majority of goods and services, including petrol and diesel, food, clothes, electronics, utility bills and hotel rooms.
On the other hand, medical treatment, financial services, rent, school tuition and public transport are not included in the VAT. But Higher education will be taxed in the UAE.
Mohammed Al-Khunaizi, a member of Saudi Arabia’s Shoura Council said: “The imposition of VAT will help to raise tax revenues of the Saudi government to be utilized for infrastructure and developmental works.” He also mentioned that the VAT is a key revenue source for more than 166 countries around the world.
In addition, Al-Kunaizi stated that they’re going to be punitive measures adopted for those who haven’t registered, or for those that violate the laws. The Ministry of Commerce and Investment has announced that in cooperation with the General Authority for Zakat and Tax (GAZT), it will intensify inspection tours in markets and commercial firms across the Kingdom to track down irregularities before and during application of the VAT.
According to the BBC report, Other GCC countries have also committed to introducing VAT, though some have delayed plans until at least 2019.