As many like to say, “money makes the world go around,” a statement that can vividly project the issue addressed here. VAT (Value Added Tax), is a type of tax that is typically indirect and mostly follows through in the field of business. It is a certain percentage that is enforced on many goods that are produced by a business. Generally, VAT is applied almost globally. In more than 160 countries, to be precise. VAT can be found in all the steps that a product takes to be correctly sold, from the production and distribution to the final sale of the good(s) or even the service involved.


VAT was officially implemented in Saudi Arabia after continuous consultations (both publicly and privately), at a gathering of the Committee on Financial and Economic Cooperation. So far, the VAT will begin taking action on the 1st of January, 2018 with a standard rate of 5%. However, this “5%” will not be enforced on everything. In fact, certain merchandise and goods will not be exposed to any percentages whatsoever.


In addition, there are many aspects greater than just simple merchandise such as; loans, credit cards, mortgages, finance leases, banknotes or securities transactions, current accounts, deposits and savings accounts. These advanced activities do not have a forced VAT encrypted on them and are charged to the transfer fees or placed under the “zero rate” category. Registration is key especially for businesses which means that all persons and businesses that have a responsibility by LAW do have a requirement to register with the General Authority for Zakat and Tax (GAZT) within 30 days before January 1st and those who do not register do have consequences such as paying a 10,000 riyal fine.


Now, VAT does have its advantages. Of course, it is aiding the country in order to help provide for many advancements and creating a better support system for the 2030 vision that is highly anticipated by everyone, but why VAT? Well, according to Ibrahim Al-Assaf, the VAT would be much more easier to monitor and control as opposed to other taxes which are easily avoidable. Furthermore, it was exclaimed multiple times that VAT will accommodate everyone of all incomes since it would exclude 95 food items; however, all residents must apply to this Saudi economic breakthrough.


Lastly, since our country has never experienced such a breakthrough, it is a substantial modification to the economy and the lifestyles of many. Moreover, it does carry with it some benefits such as yielding anywhere from 0.8 percent to 1.6 percent of gross domestic product, depending on the country and, if held correctly, can truly develop the economy.


5 comments on “VAT

  1. Very informative, good job


  2. Such an important topic. Well done. Very informative ,exelant languag . I think one point is pending verification (probably), which is the 10,000 sr fine for those who didn’t register, was this officially implied? Great in lighting in good timing.


  3. Totally agree, VAT could be a great economical development apportunity, however I personally believe that there is only one flaw in the enforcement process; details and specifications were not communicated properly to public. We are still looking for bits and bites here and there to form a clear vision! I hope that more info would be available to public with actual enforcemnt.


  4. Very informative and very nice

    Good job


  5. I am so impressed and proud of your work!


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