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Saudi Arabia To Treble VAT Rate To 15pc In Response To COVID-19

Friday, May 15, 2020

Saudi Arabia has announced its decision to increase its headline value-added tax rate to 15 percent from five percent, in a surprise break from the Gulf Cooperation Council's harmonized value-added tax framework.

Bahrain, Saudi Arabia, Qatar, Oman, the United Arab Emirates, and Kuwait agreed to introduce value-added tax as a group. The bloc had initially discussed implementing VAT from 2012 but this was pushed forward multiple times. In 2016, GCC finance ministers approved the VAT framework, which set out the parameters of the regime that should apply in all states. It featured a rate of five percent that all states would follow. However, the VAT framework did not stipulate that the tax must be introduced simultaneously by the member states on a certain date and so far only three have done so.

So far just Bahrain, Saudi Arabia, and the United Arab Emirates have implemented the levy. The United Arab Emirates Government responded to the tax hike stating that it would not follow suit.

Saudi Arabia's decision to hike the value-added tax rate from July 1, 2020, and to repeal the cost of living allowance is intended to buoy the country's finances amid a slump in revenues and record-low oil prices.