The Saudi General Authority for Zakat and Income Tax announced that on December 20 it will set a date for mandatory registration of establishments with sales ranging between $100,000 and $266,000 annually, currently exempt from Value Added Tax.
The Authority approved a set of fines facing all entities submitting false documents for the purposes of tax evasion. Any entity dodging taxes must pay fines up to 3 times the value of its goods and services.
In case of failure to apply for registration, a fee of SAR 10,000 and an additional fine ranging between 15 and 25 percent of VAT value shall be imposed if the tax return is not submitted.
VAT related measures will be applied in January 2019.
“The implementation of the tax on the local market has had positive results, including increasing the level of market transparency,” said Jawhar Al Salem, indirect tax supervisor at the General Authority for Zakat and Income.
He went on to add that such results gave institutional owners opportunities to make sound decisions.
Al-Salem added implementing added value taxation has contributed to improving the level of performance, raising the level of credibility of institutions and opening up more job opportunities for financial accounting specialists.
Al-Salem said the 5 percent tax rate imposed on all offered goods and services is not deductible at 100 percent.
He also pointed out that there is a zero percent tax on exempted sectors by the tax system, such as medicine, medical equipment, international transport, supply of high-purity gold bullion and exportation outside the Kingdom.
In June 2016, the GCC countries agreed to impose VAT across the GCC region. In February 2017, Saudi Arabia ratified the GCC VAT framework and committed to impose VAT with effect from January 1, 2018. VAT will be introduced at a standard rate of 5%.
The Authority is responsible for managing the implementation, administration and enforcement of VAT in Saudi Arabia. It does so in close coordination with other relevant entities.
