Saudi Arabia’s General Authority for Zakat and Tax has announced that private sector companies with annual revenue exceeding SAR375,000 ($100,000) will pay monthly value added tax from January 2018, according to reports.
Saudi Gazette cited the authority as detailing the tax system during a workshop held at Jeddah Chamber of Commerce and Industry.
The authority was quoted as saying the tax would be applied to all private sector establishments including oil change shops, repair workshops and eligible small businesses.
Failure to pay the tax could result in a fine or jail for company executives.
Saudi Arabia and the other Gulf Cooperation Council countries will introduce the 5 per cent VAT rate from January next year.
“It’s only 5 per cent and companies can regain that 5 per cent through the discount right of the income tax,” the authority’s head of legal team for indirect taxes, Misfir Al-Dihaim, was quoted as saying.
“If the company runs into losses, it still has to pay its VAT. I urge all private businesses to ensure that all of its legal paperwork and documented information is correct in order to avoid facing any legal penalties.”
He also assured business leaders that they would not lose revenue by paying VAT as the cost would ultimately be passed on to the end consumer.
Jeddah General Authority for Zakat and Income’s Ahmad Al-Taifi was further quoted as saying VAT violators would be subject to double the 5 per cent rate
“If the violator pays an incorrect amount, they are subjected to pay 50 per cent more of the original VAT. Violators who state an incorrect amount of reclaimed tax will also be subjected to pay 50 per cent of the original VAT,” he said, according to the publication.
A recent survey conducted in the UAE found many businesses were unprepared to implement VAT and few had set aside resources to fund their implementation.