Does Your Saudi Business Make Over $100,000 Annually? Prepare To Pay VAT- Valutrics

Saudi Arabia’s General Authority for Zakat and Tax has asked private sector establishments with annual revenues of over SAR375,000 (around $100,000) to pay monthly VAT starting January 2018.

The mandate is applied to all private sector establishments, including oil change shops, repair workshops, and eligible small businesses, it said.

Failure to adhere to the new regulations may result in a fine or imprisonment.

VAT is only 5% and companies can regain that 5% through the discount right of the income tax, Misfir Al-Dihaim, head of the legal team for indirect taxes at the authority, said while addressing a workshop on VAT held last week.

If a company runs into losses, it still has to pay VAT, he said.

Al-Dihaim said companies would not lose revenues by paying VAT as the tax requirement will be reflected on the end consumer.

Al-Dihaim urged private businesses to make sure that legal paperwork and documented information is correct to avoid facing legal penalties.

The authority has put in place strict penalties against violators of the new regulations, Jeddah General Authority for Zakat and Income official Ahmad Al-Taifi said, adding that those who do not comply may be subjected to pay double VAT.

If the violator pays an incorrect amount, they are subjected to pay 50% more of the original VAT,  Al-Taifi said.

Violators who state an incorrect amount of reclaimed tax will also be subjected to pay 50% of the original VAT, he said.

Those who provide inaccurate information will also be asked to pay fine, he said.

Despite administrative and technical challenges, the six Gulf Cooperation Council (GCC) countries are planning to introduce a 5% value-added tax (VAT) at the beginning of 2018, according to a United Arab Emirates (UAE) finance official.

Accounting firm Ernst Young recently said VAT would considerably enhance revenues per year for the UAE and other GCC countries.

VAT at 5% will generate an extra income of more than $25 billion (Dhs 91.8 billion) every year for the six GCC countries, which will be substantial enough to boost infrastructure spending in the region.

While the introduction of a new tax on goods and services may seem daunting to consumers and businesses, the overall impact is not that huge, according to David Stevens, VAT implementation leader at EY.

GCC members are UAE, Saudi Arabia, Kuwait, Qatar, Oman and Bahrain.