Saudi Gazette

RIYADH — As an extension of KPMG’s effort to increase awareness of the companies about the VAT system which will be implemented by the first of January 2018 at a rate of 5%, the lowest VAT in the world, it currently assists lots of companies to understand the system, the implementation of VAT and the impact of VAT.

The VAT will be applied to all consumption taxes in the Kingdom and all the GCC states as well.

In an interview, Rupert Pease, Head of Tax in KPMG, told Saudi Gazette that “we annually hold tax seminars in the three main cities of the Kingdom which are Riyadh, Jeddah and Al-Khobar to discuss Zakat and taxes updates and other developments. This year is different than any other year, we are discussing the VAT. KPMG holds this seminar with the aim increasing awareness among companies on its importance of implementing VATs and the penalties can some companies have.”

“We also assist them with the reconfiguration of the system. So by 2018, the systems of the companies will be able to issue invoices. VAT today is a new concept to the Kingdom and the region, although it is a very old concept in the world. It dates back to 1954,” he added.

The penalties are very high for the companies which do not charge VATs on their taxable supplies, companies which do not calculate correctly their VATs returns, and the companies that will late files of VAT returns. ‘We have a situation where VAT differs from tax and zakat. Because there are no penalties on zakat and the corporate tax is very low,” Pease stressed.

VATs have been used globally from governments to generate revenues to assist them proving better services in health care, education, security and police, and infrastructure. “The Kingdom is transitioning itself from oil dependent country to non-oil dependent country. VAT is part of the government plans to diversify economy and earn revenues rom different sources,” he explained.

When asked about his expectations for the revenues generated by VAT, he said: “It is very difficult to predict how much the revenue will be. 2018 will make it clear. We will see how it goes. The VAT is 5% on all consumption supplies. The 5% is a rate which will be adopted by all the GCC states.”

“Concerned authorities are planning an awareness program for individuals to increase their awareness as well,” he said.

“My message is for companies which did not start yet their VAT process to take the VAT very seriously. The penalties are substantial,” he noted.