Saudi, UAE introduce VAT in first for Gulf
Dubai (AFP) - Saudi Arabia and the United Arab Emirates introduced value-added tax from Monday, a first for the Gulf which has long prided itself on its tax-free, cradle-to-grave welfare system.
Saudi Arabia compounded the New Year blow for motorists with an unannounced hike of up to 127 percent in petrol prices with immediate effect from midnight.
They are the latest in a series of measures introduced by Gulf oil producers over the past two years to boost revenues and cut spending as a persistent slump in world prices has led to ballooning budget deficits.
The five percent sales tax applies to most goods and services and analysts project that the two governments could raise as much as $21 billion in 2018, equivalent to 2.0 percent of GDP.
But it marks a major change for two super-rich countries where the mall is king. Dubai has long held an annual shopping festival to draw bargain hunters from around the world to its glitzy retail palaces.
Saudi Arabia has deposited billions of dollars in special accounts to help needy citizens face the resulting rise in retail prices.
The other four Gulf states -- Bahrain, Kuwait, Oman and Qatar -- are also committed to introducing VAT but have delayed the move until early 2019.
None of the Gulf states levy any personal income tax and none have any plans to do so.
The International Monetary Fund has repeatedly urged Gulf states to diversify their revenues away from oil, which accounts for more than 90 percent of the Saudi budget and 80 percent in the UAE.
Both Riyadh and Abu Dhabi asked all companies with earnings of $100,000 or more a year to register in the VAT system.
The UAE finance ministry said that VAT returns will be used "for infrastructure development ... (to) upgrade public services ... and boost UAE economy competitiveness."
The hike in fuel duty in Saudi Arabia was the second in two years.
But it still leaves petrol prices as some of the lowest in the world.
High-grade petrol rose 127 percent from 24 cents a litre ($1.09 a gallon) to 54 ($2.46), while low-grade petrol rose 83 percent from 20 cents a litre (91 cents a gallon) to 36.5 ($1.66).
Duty on diesel and kerosene remained unchanged.
- 'They'll tax the air' -
The introduction of VAT coupled with the increase in fuel duty is expected to bring an abrupt end to a year of negative inflation in Saudi Arabia.
Riyadh-based Jadwa Investment predicted that inflation could reach as much as five percent after the new measures.
Saudis reacted sarcastically on social media to the new sales tax.
"They are even taking taxes on car parking. I am afraid they will next tax the air," wrote Ahmed bin Fatima.
Saudi Arabia, whose economy contracted by 0.5 percent last year for the first time since 2009, has introduced a raft of measures to raise revenue and cut spending as it bids to balance its books.
Last month, it cut the government subsidy on electricity supply for the second time in two years, leading to a sharp rise in bills.
Riyadh posted budget deficits totalling $260 billion over the past four fiscal years and does not expect to balance its books before 2023.
To finance its mounting public debt, the kingdom has withdrawn around $250 billion from its reserves over the past four years, reducing them to $490 billion.
It has also borrowed around $100 billion from the international and domestic markets.
https://www.yahoo.com/news/saudi-uae-introduce-vat-first-gulf-113354439.html
UAE And Saudi Arabia End Tax-Free Living, Roll Out 5% VAT As Oil Revenue Slump
The United Arab Emirates and Saudi Arabia, where residents had long enjoyed a tax-free and heavily subsidized existence, introduced International Monetary Fund (IMF)-backed value-added tax (VAT) on January 1, following an oil slump. A 5% levy is imposed on most goods and services to boost revenue as the collapse in crude prices since 2014 sparked cutbacks.
Although it threatens to slow economic growth at a time when it is already sluggish, the UAE is expected to raise around $3.3 billion from the tax. Meanwhile, Saudi Arabia, which unveiled the biggest budget in its history, plans to spend $261 billion this fiscal year as the government forecasts a boost in revenue from the introduction of VAT. As part of economic diversification efforts, the kingdom is broadening its investment base and boosting other non-oil income.
Saudi Arabia, the world’s biggest oil exporter and the largest economy in the Arab region, froze major building projects, cut cabinet ministers’ salaries and imposed a wage freeze on civil servants to cope with 2016’s budget deficit of $97 billion. It also made unprecedented cuts to fuel and utilities subsidies. It aims to balance its budget by 2020.
The IMF has recommended oil-exporting countries in the Gulf introduce taxes as one way to raise non-oil revenue. The IMF also recommends Gulf countries to introduce or expand taxes on business profits.
The IMF mideast director Jihad Azour said VAT is part of a long-term tax reform to help Gulf states reduce their dependence on oil revenues. “We believe VAT is an important component of the fiscal adjustment and revenue diversification plans of GCC countries and these measure are necessary for long-term fiscal sustainability,” he said. Saudi Arabia and the UAE last summer imposed a 100% tax on tobacco products and energy drinks, and a 50% tax on soft drinks.
The VAT will apply to a range of items like food, clothes, electronics and gasoline, as well as phone, water and electricity bills, and hotel reservations, The Khaleej Times reports. Alongside domestic rent, transport (including air travel), healthcare and schooling will be excluded from VAT. Property buyers will not have to worry about VAT on their home purchase as well. Even with a 5% jump in prices, the tax rate is still significantly less than the average VAT rate of 20% in some European countries.
The cost of living in the UAE is expected to rise about 1.5% this year because of the VAT, according to The National. As it is, Dubai and Abu Dhabi are the most expensive cities to live in the Arab world, according to Mercer’s 2017 Cost of Living Survey.
Other Gulf countries were originally intended to introduce VAT simultaneously in January, but are much less further along in preparing, according to Reuters. Kuwait in particular may lag because of its slow-moving civil service and because its relatively independent parliament may want a say in the process. Officials in Oman have not announced a firm date for VAT, while Bahraini officials have said it is expected by mid-2018.
https://www.forbes.com/sites/suparnadutt/2018/01/01/uae-and-saudi-arabia-end-tax-free-living-roll-out-5-vat-as-oil-revenue-slump/#6131045d2021
Now Tourists In Saudi Arabia Will Get Refunds on VAT
Tourists in Saudi Arabia will be refunded for all their paid value-added tax (VAT), as The General Authority of Zakat and Tax (GAZT) announced. It is not yet finalized but they are working on making it happen; so it has not been decided yet when will it be implemented.
“According to executive regulations, it is possible for companies to return the VAT to tourists on products they are taking to their countries,” Hamoud Al-Harbi, director of the VAT operations center at GAZT, told Arab News. “However, if the VAT is less than €100, it won’t be refunded,” he added.
via news
Tourists in Saudi Arabia will be refunded on products that are on the list for the VAT. The three commodities that are selectively taxed now, are tobacco and its derivatives, energy drinks, and soft drinks.
Saudi Arabia officially applied the selective commodity tax on June 11, 2017 and will be imposing VAT with effect starting 2018, with a standard rate of 5%.
VAT is applied in more than 160 countries around the world as a reliable source of revenue for state budgets.
Proof of VAT payment and products they paid for, is required for the refund to take place, However, expat tourists who live in Gulf Cooperation Council (GCC) countries will not be included under the system of the returned VAT.
https://www.msn.com/en-ae/news/world/now-tourists-in-saudi-arabia-will-get-refunds-on-vat/ar-BBHr2lO?li=BBqrVLO
Saudi Arabia and United Arab Emirates introduce VAT for first time
Value Added Tax (VAT) has been introduced in Saudi Arabia and the United Arab Emirates for the first time.
The 5% levy is being applied to the majority of goods and services.
Gulf states have long attracted foreign workers with the promise of tax-free living.
But governments want to increase revenue in the face of lower oil prices.
The tax kicked in on 1 January in both countries.
The UAE estimates that in the first year, VAT income will be around 12 billion dirhams (£2.4bn; $3.3bn).
No plans for income tax
Petrol and diesel, food, clothes, utility bills and hotel rooms all now have VAT applied.
But some outgoings have been made exempt from the tax, or given a zero-tax rating, including medical treatment, financial services and public transport.
Organisations such as the International Monetary Fund have long called for Gulf countries to diversify their sources of income away from oil reserves.
In Saudi Arabia more than 90% of budget revenues come from the oil industry while in the UAE it is roughly 80%.
Both countries have already taken steps to boost government coffers.
In Saudi Arabia this included a tax on tobacco and soft drinks as well as a cut in some subsidies offered to locals. In the UAE road tolls have been hiked and a tourism tax introduced.
But there are no plans to introduce income tax, where most residents pay 0% tax on their earnings.
The other members of the Gulf Co-operation Council - Bahrain, Kuwait, Oman, and Qatar - have also committed to introduce VAT, though some have delayed plans until at least 2019.
Saudi Arabia, UAE Launch VAT For First Time
Saudi Arabia and the United Arab Emirates introduced Value Added Tax on Monday, a first for the Gulf States.
The Gulf states are forced to shun their tax-free status to boost revenues as their finances were hurt by lower oil prices.
The 5 percent levy was imposed on the majority of goods, including fuel, and services. There are no plans to introduce an income tax yet.
Initially, all six countries in the Gulf Cooperation Council had planned to introduce the 5 percent VAT on January 1, 2018. However, only Saudi Arabia and UAE went ahead with the move as planned.
Qatar reportedly plans to launch VAT in the second quarter of this year, while Oman and others have delayed it until 2019.
The International Monetary Fund estimated that the overall revenue impact of the VAT tax would be 1.5 percent of GDP for the UAE and about 1.6 percent for the Saudi Arabia by 2020.
by RTT Staff Writer
http://www.rttnews.com/story.aspx?Id=2848299
https://bcorpus.blogspot.com/2018/01/saudi-and-uae-introduce-tax.html
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