Saudi Arabia raises value-added tax from 5% to 15% by July 2020

Saudi Arabia announced Monday its Kingdom would increase value-added or VAT from 5 percent to 15 percent starting July 2020 to manage the economic impact of COVID-19 pandemic.

“In addition to that, it was decided to stop the cost of living allowance starting from the month of June of the year 2020, and to raise the value-added tax rate from (5%) to (15%) starting from the first of the month of July of the year 2020,” reported Saudi Press Agency ().


“His Excellency the Minister of Finance and the Minister of Economy and Designated Professor Muhammad bin Abdullah Al-Jadaan explained the importance of measures aimed at protecting the Kingdom's economy to overcome the unprecedented global crisis of the Corona pandemic and its and economic repercussions with the least possible damage,” it added.

His Excellency explained the pandemic has caused “three shocks to the Kingdom's economy” which caused the government to interfere to “absorb” these shocks and ensure financial stability.

The report said the first shock is the “unprecedented decline in the demand for oil, it negatively affected the price level and led to a sharp decline in oil revenues” which is a primary source of public revenues for the state budget.


The second shock meanwhile was “the necessary preventive measures taken to preserve the lives and of citizens and residents and prevent the spread of the pandemic caused many local economic activities to stop or decline, and this negatively affected the volume of non-oil revenues and economic growth.”

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Saudi Arabia increases value-added tax from 5% to 15% by July 2020

The third shock that affected the Kingdom's finances is the “unplanned expenditures that required government intervention by continuously increasing funds for the health sector to support the preventive and curative capacity of health services.”


Saudi Arabi also spent budget on projects to support the economy, reduce the impact of the pandemic, and preserve the jobs of citizens.

“The impact of what has been approved of measures reached nearly 100 billion riyals, which included: the cancellation, extension or postponement of some items of operating and capital expenditures for a number of government agencies and the reduction of the credits of a number of initiatives to achieve vision and major projects for the fiscal year (1441/1442 AH) (2020 AD),” SPA said.