UPDATE: Post the publishing of this article, Saudi authorities have clarified that December 20 is now the deadline for mandatory Value Added Tax (VAT) registration in Saudi Arabia, ending days of confusion and speculation in financial and business circles.
Read more here.
Saudi Arabia has set a firm deadline for businesses to register for the Value Added Tax (VAT), which is to be implemented by January 1 next year along with its Gulf Cooperation Council (GCC) partners.
According to a notification from the General Authority of Zakat and Tax (GAZT), August 26 will be the last date for registration of businesses with an annual turnover of SAR375,000 or more.
As per the notification, VAT will be imposed on all goods and services at the rate of 5% of the cost of good or service sold, in line with the GCC accord on the tax.
Exceptions to the 5% VAT would include basic food items, essential medicines, and exports of goods and international services. Saudi Arabia is also expected to exempt healthcare, education, residential property, and finance.
However, it is more than likely that many of the businesses are not ready for VAT or its impact on their operations.
A survey had recently found that a majority of firms in the GCC have not made budgetary provisions for VAT.
This is despite analysts’ prediction that VAT will increase costs for businesses and add at least two percentage points to inflation in 2018, found the survey conducted by Thomson Reuters and the Association of Chartered Certified Accountants (ACCA).
According to the study which was participated by 330 company representatives, 88% of firms in the region are unprepared for the introduction a 5% GCC-wide VAT next year.
VAT would be the second indirect tax imposed on the Saudi population following the tax imposed on cigarettes, energy drinks, and soda drinks in the Gulf state.
VAT is expected to generate around SAR57 billion, according to some estimates, for the kingdom’s coffers, which are straining under the impact of low oil prices.