Saudi Arabia hikes VAT to 15%, halts cost of living allowances

EditorEditor    11 May 2020
Saudi Arabia hikes VAT to 15%, halts cost of living allowances

News reports confirm that the Kingdom of Saudi Arabia (KSA) has decided to increase the VAT rate from 5% to 15% effective 1st July 2020.

https://saudigazette.com.sa/article/592949/SAUDI-ARABIA/Saudi-Arabia-hikes-VAT-to-15-halts-cost-of-living-allowances  

This is a significant announcement coming in the COVID-19 stressful days and the idea behind increasing the tax rates is clear - augment the revenue for the Government. With an increase in the tax rate, the companies operating in the KSA or those in other countries having a presence in the KSA need to factor in a lot of issues while dealing with the increased rate of VAT. Some of them would definitely include changing their ERP systems to capture the increased rate of tax, managing the transitional issues, for example what rate of VAT should apply on services already provided but not billed, rate of tax on continuous supplies of services or lease contracts, advances received but adjusted post 1st July etc. It will be interesting to note how the UAE Government will react to this announcement since the GCC VAT Framework allowed countries to increase the rate of VAT only when at least two countries agreed for such an increase. But having said that, the true spirit of the GCC VAT Framework has not been followed in entirety by all the GCC countries.

We shall keep you posted of the developments.

 

You can access Law including Guidelines, Cabinet & FTA Decisions, Public Clarifications, Forms, Business Bulletins for all taxes (Vat, Excise, Customs, Corporate Tax, Transfer Pricing) for all GCC Countries in the Law Section of GCC FinTax. 

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