Saudi to apply 5% tax to fuel

Saudi Arabia’s tax authority has said a 5 per cent value added tax rate being introduced on January 1 will apply to fuel.

The General Authority of Zakat and Tax made the announcement on a special Twitter account to handle VAT issues.

The answer came in response to a question from a Saudi citizen.

“The VAT rate of 5 per cent for petrol will be applied starting January 1, 2018,” it said.

The previous week the authority had indicated the tax would also apply to ticketed transport journeys within the kingdom.

International travel will be zero-rated.

Separately the kingdom is also working on a mechanism for fuel price increases but this is now expected to be delayed amid wider concerns that the pace of economic reform efforts is damaging the economy.

Read: Saudi to push back balanced budget target to 2023

New details of the value added tax, set to be implemented in both the UAE and Saudi from next year, are being revealed in both countries ahead of implementation.

Earlier this month, the UAE’s Federal Tax Authority confirmed the tax would apply to all food items and utility bills.

The country had stated in 2015 that 100 food items would be zero-rated.

Read: UAE to apply VAT to all food items, utility bills

In Saudi Arabia, the tax authority also said in recent weeks that the tax would be applied to money transfer fees but other financial products like loans and accounts would be exempt.

Read: Saudi money transfer fees to increase 5%

The neighbouring Gulf Cooperation Council states are expected to implement VAT after the UAE and Saudi in 2018 or early 2019.

Read: All GCC states still committed to VAT but dates will vary, IMF says