Saudi Arabia’s Finance Minister vows a review of the VAT rate. Finance Minister Mohammed Al-Jadaan says that government will reconsider the rate once its financial position recovers.
Saudi Arabia’s VAT rate increased by a considerable margin in 2020. Declining oil prices and Covid’s effect on the economy were both contributing factors to the increase. “These measures are painful but necessary to maintain financial and economic stability over the medium to long term,” Al-Jadaan said at the time.
A number of businesses will welcome the reassurance, as the finance minister previously ruled out an immediate VAT rate cut. However, there is still no clear timeline on when the rate will be readjusted.
No clear VAT rate timeline
As reported by Arab News, Crown Prince Mohammed bin Salman earlier this year said that the increased VAT rate will “continue for a year, a maximum of five years, and then things will go back to what they were.”
VAT increases in the GCC
Saudi Arabia is not the only GCC state to increase VAT. Bahrain’s parliament recently approved doubling its VAT rate from 5% to 10%. In addition to the economic downturn connected to Covid, Bahrain has incurred considerable debt in the last decade. Bahrain has implemented a number of fiscal reforms.
Not all GCC states have immediate plans to increase VAT rates. At the present time, Oman says it is not planning to increase VAT beyond the current 5% rate.
Manage changing rates & maximise VAT recovery
As VAT regulations and rates change, businesses can ensure they remain effortlessly compliant, while maximising VAT reclaim opportunities everywhere they do business.
Get in touch with VAT IT for a seamless end-to-end VAT compliance and reclaim solution tailored to your business.