VAT BY COUNTRIES AND HOW IT WILL AFFECT KSA
Many countries before Saudi Arabia have implemented VAT and several other taxes to boost their economies. This article gives a brief introduction on what is it? History of Tax and what to expect in the new year?
What is VAT?
According to General Authority of Zakat and Tax (2018), “Value Added Tax (or VAT) is an indirect tax imposed on all goods and services that are bought and sold by businesses, with a few exceptions. VAT is applied in more than 160 countries around the world as a reliable source of revenue for state budgets. VAT is imposed at each stage of the supply chain from the production and distribution to the final sale of the good or service.” As mentioned VAT is not new in the international market, but Saudi Arabia is joining the rest of countries in 2018 with initial 5% charges on goods or services. Let’s see top ten countries where individual’s income tax is charged over the years as it gives an idea how changes can be expected.
Top Ten Countries – Individual income tax
Source: KPMG Official Website, (2018)
Kingdom of Saudi Arabia including many Gulf/Middle East Countries has not charged individuals/companies with any VAT in the past. However, in 2017, KSA have announced that VAT will be implemented from January 1st, 2018. Many Companies and Individuals are now worried about the new changes, some have welcomed the changes, but many have shown resistance towards the implementation.
What do we know so far?
There are some major points which have been mentioned by analysts, audit and other organizations which will affect the daily purchases. In short, VAT affects all the imports which includes almost every industry i.e. retail, automotive (cars) etc. But there are some goods/services which will be exempted which includes Real Estate Leases, Life Insurance, Financial credits, Islamic Finance products, Investment metals (Unique), International Transport services of goods or passengers (Source: vatlive.com, 2018). Companies must register on official website of General Authority of Zakat and Tax (Gazt). GAZT have further explained the VAT registration for the companies based on their annual sales.
Already 91,100+ companies have registered with GAZT as it is official requirement now for every business within Kingdom of Saudi Arabia or if they are dealing with the territory. There is not much clarification on tax implementation on salaries or incomes directly, but it is possible that these changes will be implemented and published soon. The countries implemented tax also made clear that income should be taxed before being transferred via bank (BACS). Companies will also have to submit the Annual Tax claims and other aspects related to it, these taxes will be checked through company bank accounts. There is also a possibility that audit companies will play a major role in informing the public/government bodies.
We will post any new updates on our blog later, but do let us know how do you feel about it.