Value Added Tax (VAT) has been introduced in Saudi Arabia on 1st January 2018 to boost non-oil income. It was introduced at 5 per cent tax on most goods and services in Saudi Arabia. Implementing Value Added Tax (VAT) has ended tax free living for the residents and ex-pats in Saudi Arabia.
Mohammad al-Jadaan, Finance minister of Saudi Arabia announced on Monday that the VAT (Value Added Tax) will increase from 5 percent to 15 percent from July 2020. Also, Saudi Arabia’s government is suspending the cost of living allowance with effect from 1st of June 2020. The measure has been taken to overcome the consequences of the COVID-19 pandemic that caused unprecedented expenditure on the financial sector.
Saudi Arabia’s main source of revenue in the state budget is Oil. Mr. Jadaan explained the first shock in the economy was the decline in Oil Demand. While fighting with global pandemic Covid -19, the government of Saudi Arabia had to take a lot of precautionary measures that led to a decrease in Oil demand, which resulted in a sharp decline in Oil revenue.
Mr. Al Jadaan said, the second shock came in the form of the required precautionary measures taken to prevent the spread of the Covid -19 pandemic that led “to the depletion of many local economic activities, which had a negative impact on non-oil revenue and economic growth.
He said the third shock comprised of unplanned expenses that required government intervention such as increased allocations to support the prevention and treatment capacity of the healthcare sector, as well as initiatives to support the economy, soften the blow of the pandemic, and maintain jobs for citizens.
The UAE’s Ministry of Finance (MoF) confirmed to the citizens that there are no immediate plans to raise value-added tax (VAT) in the United Arab Emirates beyond its current rate of 5%.
Published by: UAE Cash Loans Team
Published Date: 11th May 2020