Saudi Arabia gives final approval to VAT

January, 2017

Saudi Arabia is ready to implement a region-wide value added tax, the cabinet said on Monday (30 th Jan, 2017), giving final approval to the measure which will take effect next year. Cabinet “decided to approve the Unified Agreement for Value Added Tax” to be implemented throughout the six-member Gulf Cooperation Council, the official Saudi Press Agency said.”A Royal Decree has been prepared,” it said.


A five-per cent levy will apply to certain goods following a GCC agreement last June.

The move is in line with an International Monetary Fund recommendation for Gulf states to impose revenue-raising measures including excise and value added taxes to help their adjustment to lower crude oil prices which have slowed regional growth.


The GCC countries have already agreed to implement selective taxes on tobacco,and soft and energy drinks this year. Regional residents had long enjoyed a tax-free and heavily subsidized existence.


Saudi Arabia, the world’s biggest oil exporter, froze major building projects, cut cabinet ministers’ salaries and imposed a wage freeze on civil servants to cope with last year’s record deficit of $97 billion. It also made unprecedented cuts to fuel and utilities subsidies.
The kingdom is boosting non-oil revenue as part of economic diversification efforts and aims to balance its budget by 2020.

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