Saudi Gazette

Jeddah — From Jan. 1 consumers will have to pay more on phone bills, Internet data packs and paid apps as the impending Value Added Tax (VAT) will be applicable on utility bills.

The proposed 5% VAT in the Kingdom is much lower than in other parts of the world.

VAT on utility bills will be in line with the prevailing international norms and based on international practice, according to sources.

Telecom services such as mobile phone, fixed line, data and payable digital services fall under the tax ambit and will be subject to VAT at the standard rate.

After the implementation of VAT, effective airtime which is also known as talk-time or mobile credit for prepaid customers will be reduced. For instance airtime on a SR100 prepaid voucher will marginally dip to SR95 after the deduction of SR5 as VAT.

For post-paid users, VAT is likely to be added to bills.

But it is not clear whether VAT will be charged on an overall bill including subscription amount or only on call cost.

However, roaming charges within Gulf Cooperation Council (GCC) countries are exempt from VAT, said sources.

Telecom companies have not yet announced the mechanism to apply VAT.

According to the latest report of the Communications and Information Technology Commission (CITC), there are 43.63 million mobile subscriptions, 24 million data users and 3.75 million land lines in the Kingdom.

VAT is coming at a time when the tariff for data usage has been increasing and lucrative economy options for data bundles are shrinking. Data subscription is high in the Kingdom.

The Kingdom will join the club of nearly 160 nations by implementing VAT from January 1, 2018.