Finally it is confirmed that there will be tax in Saudi Arabia and other Gulf Countries. Last year, in principle the GCC countries – Saudi Arabia, Bahrain, Oman, Qatar, UAE, Kuwait had agreed to implement the Value Added Tax (VAT) by 1 st January, 2018. Now the Saudi Cabinet has approved this VAT framework treaty in the beginning this year (2017). With the Cabinet’s approval, VAT’s implementation is sure. So, what is VAT and how will effect expatriates leaving in Saudi Arabia ?
Q) What is VAT ?
A) VAT – VAT stands for Value Added Tax – that is tax on value addition on product. Some call it tax on consumption. It is implemented in over 150 countries of world.
Q ) How much is it ?
A) It is will be 5%
Q) Does it apply to all services and products ?
A) No. It is expected that certain categories will be exempted from it. Normally, following categories are exempted or zero rated:
- Medical, cultural and educational goods and services, and financial and insurance services.
- Daily necessities.
- Bread and milk, books, scientific journals, medical supplies.
- Transactions relating to the exported goods and the services provided in foreign countries.
Q) When is it going to be implemented ?
A) 1 st January, 2018 or maximum by first quarter of 2018
Q) How will it affect the expatriates ?
A) The expatriates will be affected in the follow ways:
1. The prices for some of the goods and services will slightly increase. As there slightly addition (5%) at each stage of value addition.
2. Companies need streamline their accounting in order to accommodate VAT framework.
3. All business transactions will become more transparent and tassatur (hidden) businesses will disappear.
1. SAMA – Link
2. Arab News – http://www.arabnews.com/node/1046616/saudi-arabia