Saudi Arabia has increased its standard VAT rate from 5% to 15% from 1 July 2020. The aim is to sure up government revenues as the COVID-19 crisis has led to a fall in global oil prices and oil duties for the Arab Gulf state.
Saudi Arabia part of six-nation GCC VAT union
Saudi Arabia introduced its Value Added Tax regime on 1 January 2018. This was part of a six-state Gulf Cooperation Council scheme to create a VAT and Customs Union. So far, only Saudi Arabia, the UAE, Bahrain and Oman (April 2021) have implemented VAT. Qatar and Kuwait have not made their plans clear yet.
The government has already announced a 5 per cent or $13.3bn cut in budget spending and more reductions are expected. Analysts at Al Rajhi Capital estimate the increase in VAT revenue to generate around SR28bn this year. “If the VAT stays at 15 per cent for 2021, we expect additional revenue from it to be SR88bn,” they said in a research note.
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Arab Gulf GCC VAT implementations
| 2028+ | Kuwait decides between VAT or excise taxes |
| 2025? | Qatar delays VAT on inflation worries |
| Jan 2022 | Bahrain doubles VAT to 10% |
| 16 Apr 2021 | Oman introduces 5% VAT |
| 1 Jul 2020 | Saudi Arabia trebles VAT to 15% |
| 1 Jan 2019 | Bahrain launches 5% VAT regime |
| 1 Jan 2018 | Saudi Arabia and UAE introduce 5% VAT regime |
| 2016 | VAT and Customs Union agreement: Bahrain; Kuwait; Oman; Qatar; Saudi Arabia; UAE United Arab Emirates |
