Saudi Arabia Hikes VAT, Customs Duties

Trade & Policy

Saudi Arabia Hikes VAT, Customs Duties

The Saudi Arabian government has announced customs duties increases on about 3,000 goods, effective 10 June 2020. The rate hike, revealed on 27 May 2020, follows an announcement earlier in the month that value added tax (VAT) will also triple, starting 1 July 2020. Customs tariff increases will range from 3% to 25% on textiles and clothing, leather items and footwear, plastics and rubber products, many food commodities, mineral products such as coal & lime, chemical products, base metals such as steel, iron, copper, nickel & aluminium. Building materials such as cement, ceramic, marble, stone and wooden panels will also be hit by the higher rates, as will machinery, equipment and parts for items such as freezers, refrigerators, fire extinguishers, engines and batteries. Motor vehicles and spare parts, such as four wheel drive vehicles, armoured cars, emergency vehicles and tractors are also subject to increases. Higher rates will also be imposed on furniture and toys. The Saudi government also announced on 11 May 2020 that it will increase VAT on goods and services from 5% to 15% commencing 1 July 2020. The kingdom's General Authority of Zakat & Tax (GAZT) has introduced a transition period extending to 30 June 2021, in which certain domestic goods delivered before that date will continue to be subject to a VAT rate of 5%. However, according to international consultants, EY, only imports of goods made by 30 June 2020 will be taxable at 5%; all imports will be subject to 15% VAT thereafter, with no transitional concessions applicable.