Saudi Arabia and the United Arab Emirates have introduced a 5% value-added tax on a number of goods and services.
According to Mohammed Al-Khunaizi of Saudi Arabia’s Shoura Council:
“The imposition of VAT will help to raise tax revenues of the Saudi government to be utilized for infrastructure and developmental works”
The global decline in oil sales has led the known minimum tax havens to apply the tax in order to address budget deficits.
The VAT now applies to most products and services, including food, clothing, jewelry, electronics, phone, water and electricity bills and hotel room bookings. Exceptions include air travel, healthcare, basic surgery and state-funded education.
The Saudi Ministry of Commerce and Investment announced it will conduct compliance inspections.
“The inspection tours will be directly supervised by the joint operation room for protection of consumers, which was approved by the Council of Ministers and composed of 18 government agencies,” it said in a statement cited by Arab News.
Rapid growth of eCommerce in the region is estimated at 15-20% CAGR (compound annual growth rate) for 2018, and Anurag Bajpai, Partner and Head of Retail, KPMG in the Lower Gulf believes the VAT will not stop consumers spending:
“eCommerce in the UAE has witnessed the entry of some major players in 2017 and is consequently expected to gain further momentum in 2018, garnering a larger share of retail consumer spend. Also, it is expected that significant new retail supply may be added in 2018, leading to increased competition”
Shoppers don’t like surprises when they receive their goods from a cross-border retailer, therefore brands need to consider incorporating a fully landed cost into their checkout. This guarantee ensures no further tax or duties will be payable on delivery, in turn building loyalty and encouraging repeat purchases.