Saudi Arabia VAT Triples, Reaching 15% in Response to Economic Fallout of COVID-19
Starting 1 July 2020, the Kingdom of Saudi Arabia announced that its value-added tax rate (VAT), which is currently at 5%, will increase to 15%. The sudden move is part of the kingdom’s plan to save nearly $26 billion, and its efforts to reduce the impact of the coronavirus outbreak on their economy.
Saudi Arabia also announced the suspension of the cost of living allowance from 1 June 2020 to increase revenues. This bonus allowance was introduced in 2018 to support those with financial burdens.
The news brought fear to expats residing in other GCC countries like the United Arab Emirates, where VAT is currently at 5%, as many expect that they will be next. However, tax experts suggested that the UAE is unlikely to follow KSA. The UAE’s Finance Ministry also dismissed any current plans to increase VAT rates in the country.
