August 10, 2022


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Saudi Arabia and United Arab Emirates introduce VAT for first time

1 min read

Value Added Tax (VAT) has been introduced in Saudi Arabia and the United Arab Emirates for the first time. The 5% levy is being applied to the majority of goods and services. Gulf states have long attracted foreign workers with the promise of tax-free living.

But governments want to increase revenue in the face of lower oil prices. The tax kicked in on 1 January in both countries. The UAE estimates that in the first year, VAT income will be around 12 billion dirhams (£2.4bn; $3.3bn).

Petrol and diesel, food, clothes, utility bills and hotel rooms all now have VAT applied. But some outgoings have been made exempt from the tax, or given a zero-tax rating, including medical treatment, financial services and public transport. In Saudi Arabia more than 90% of budget revenues come from the oil industry while in the UAE it is roughly 80%.


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