The General Authority for Zakat and Tax has announced that all private sector establishments with an annual revenue of over SR375,000 ($100,000) will be paying monthly VAT starting January 2018.
It said the decision will be applied to all private sector establishments including oil change shops, repair workshops and eligible small businesses. Failure to adhere to the new regulations may result in a fine or an imprisonment.
The authority detailed the draft of the new tax law at a workshop held at the Jeddah Chamber of Commerce and Industry. The workshop was attended by over 100 legal consultants. JCCI Assistant General Secretary Mazin Kutbi was also present. The authority stated in the workshop that the VAT will be 5 percent of the revenue starting January 2018.
Head of the Legal Team for Indirect Taxes Misfir Al-Dihaim said the proposed proposed is the least in the world.
“It’s only 5 percent and companies can regain that 5 percent through the discount right of the income tax. 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,” said Al-Dihaim.
He added companies will not lose any revenue by paying its VAT as the tax requirement will be reflected on the end consumer and the authority will ensure that the entity responsible for VAT is indeed regulated within the companies’ financial operations.
Jeddah General Authority for Zakat and Income’s Ahmad Al-Taifi said the authority has put in place strict penalties against violators of the new regulations.
“Violators may be subjected to pay double the VAT. If the violator pays an incorrect amount, they are subjected to pay 50 percent more of the original VAT. Violators who state an incorrect amount of reclaimed tax will also be subjected to pay 50 percent of the original VAT,” said Al-Taifi.
He added violators are subjected to great financial fines if they provide incorrect information or try to escape paying the taxes.
Mazin Kutbi said implementing the VAT is an important step toward the Kingdom’s national objectives. The Kingdom is obliged to apply the new VAT regulations as part of its agreement with other GCC countries.
By Abdulrahman Al-Misbahi
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