KSA new taxes 2017

February 14th, 2017 by Stephen Jones Leave a reply »

In addition to support for the introduction of VAT at 5% in January 2018, Saudi Arabia announced at the end of 2016 a timeline for implementation of a tax on harmful products. The Fiscal Balance Program 2020 report, published by the Saudi government , said the kingdom would impose a 50 percent tax on soft drinks and a 100 percent tax on tobacco and energy drinks from the second quarter of 2017.

The taxes were proposed by the six-nation Gulf Cooperation Council (GCC) in December 2015, but Saudi Arabia’s Finance Ministry only signed the agreement this month, the report said.

No other Gulf country has yet announced a date for implementation of such taxes, although they have been mulling them since 2012. Studies in the GCC have found regional beverage prices to be the lowest when compared to the rest of the world and a key factor behind high rates of childhood obesity and diabetes. For example, soft drinks are priced at around AED1 (US0.27) in the UAE.

In November, the World Health Organization (WHO) suggested retail prices of sugar-sweetened drinks be increased by 20 percent through taxation, to bring about a proportional decline in consumption. The Saudi government’s Program 2020 document revealed that the country was working on plans to include “sugary snacks and drinks” in the tax segment, to fight obesity and diabetes among its population, especially children, and that this tax would be introduced from the second quarter of 2017. “The excise tax is a special tax that will be implemented on specific products with harmful health effects to disincentivise consumption of such products,” it said.

The document also said the kingdom would increase the “expat levy” payable by sponsors from the third quarter of 2017, with the fee rising every year to up to $213.30 (SR800) per worker by 2020. At present, companies pay a levy of $53.33 (SR200) per month per expat in cases where expat employees exceed the number of Saudi employees.

A new fee on expat workers’ dependents will come into effect from July 2017, the document said.

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