Saudi Arabia has ruled out an immediate VAT cut. Finance Minister Mohammed Al-Jadaan however said that a rate cut could be on the cards down the line, when finances improve.
Saudi Arabia increased its VAT rate from 5% to 15% in 2020. Saudi authorities increased VAT to make up for declining revenue amid a sharp drop in oil prices. The Covid-related economic downturn also negatively affected revenues.
“These measures are painful but necessary to maintain financial and economic stability over the medium to long term,” the finance minister said at the time.
Saudi Arabia introduced VAT in 2018.
E-invoicing in Saudi Arabia
In addition to any potential changes to the VAT rate, businesses should pay attention to Saudi Arabia’s filing requirements.
In line with global trends, Saudi Arabia is introducing e-invoicing. Businesses must therefore prepare XML invoices which need to be cleared by the tax authorit’s centralised digital system. Note that in order to comply with the rules, businesses need to be able to integrate with the official API.
VAT in the GCC
In terms of the Gulf Cooperation Council (GCC) VAT treaty, the GCC member countries agreed to seek a common VAT framework.
Currently, Saudi Arabia, the UAE, Bahrain and Oman have VAT systems in place.
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