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5pc TAX ON GOODS, SERVICES

Food and fuel are among the things subject to VAT

UAE, Saudi Arabia kick off new era with VAT roll-out

MANAMA, January 1, 2018

The United Arab Emirates and Saudi Arabia have stepped into a new era with the introduction of 5 per cent value-added tax (VAT) on the majority of goods and services beginning today (January 1).

The tax is imposed by Saudi Arabia and the UAE within the framework of a unified agreement endorsed by the member states of the GCC, said Arab News.

The UAE estimates that in the first year, VAT income will be around Dh12 billion dirhams $3.3bn), according to a BBC report.

VAT will now be imposed on petrol and diesel, food, clothes, electronics, utility bills and hotel rooms in both countries.

Medical treatment, financial services, rent, school tuition and public transport have been exempt for the tax. Higher education, however, will be taxed in the UAE.

“The imposition of VAT will help to raise tax revenues of the Saudi government to be utilized for infrastructure and developmental works,” Mohammed Al-Khunaizi, a member of the Saudi Arabia’s Shoura Council, was quoted as saying by Arab News.

He also pointed out that VAT or sales taxes are key revenue sources for more than 166 countries across the world today.

Al-Khunaizi also called for “punitive measures” to be adopted strictly for those who have not registered so far, or who violate the laws. The Ministry of Commerce and Investment has announced that in cooperation with the General Authority for Zakat and Tax (GAZT), it will intensify inspection tours in markets and commercial firms across the Kingdom to track down irregularities before and during application of the VAT.

Other GCC countries have also committed to introduce VAT, though some have delayed plans until at least 2019, according to the BBC report.




Tags: Saudi Arabia | UAE | tax | VAT |

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