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  • Saudi VAT Rate to Increase to 15% - but no plan for an Increase in the UAE

Saudi VAT Rate to Increase to 15% - but no plan for an Increase in the UAE

11 May 2020

Saudi Arabia has announced that the rate of VAT in the Kingdom will rise from 5% to 15% with effect from 1 July 2020. The change is in response to the slump in oil prices and the fall in non-oil revenues in the wake of the COVID-19 crisis.

It is reported that the UAE Ministry of Finance has responded to the news by confirming that there are no plans to increase the VAT rate in the UAE.

It is expected that guidance on the Saudi changes will be issued in due course. Questions that will need to be addressed by the guidance include how to deal with  service contracts that span the date of the rate change, advance payments and invoices, the implications for agreements entered into prior to the change, and issues arising from supplier contracts.

Businesses will also need to consider the cash-flow implications of the change, the impact on prices and demand, and the potential impact of penalties on errors and late payments. ERP and point of sale systems will need to be updated to accommodate the new rate.

All businesses with interests in Saudi Arabia or with customers or suppliers in Saudi Arabia should consider whether they will be affected.

If you would like to know more about the above, please contact Shivendra Jha and/or Brian Conn.



Khaleej Times