The United Arab Emirates and Saudi Arabia, where residents had long enjoyed a tax-free and heavily subsidised existence, introduced International Monetary Fund (IMF)-backed value-added tax (VAT) on January 1, following an oil slump. Saudi Arabia and the United Arab Emirates are ringing in the new year with the introduction of a five percent value-added tax (VAT) on most goods and services, in an effort to boost revenue and revive their oil-dependent economies. The tax, which goes into effect on Monday, will be imposed on a wide range of commodities, including food, clothes, fuel, entertainment, electronics, and telephone, water and electricity bills. Saudi Arabia is expecting a total of SR35 billion ($9.3 billion) in revenue during the first year of applying the value-added tax (VAT), the project manager of VAT at General Authority of Zakat and Tax (GAZT) was quoted as saying in a media report. In June last year, on the recommendation of the IMF, Saudi Arabia and the UAE officially applied a 100 percent selective commodity tax on tobacco and energy drinks and 50 percent on soft drinks. READ MORE: Saudi Arabia plans to hike petrol prices by 80% … to just 44 cents per liter

The move towards VAT was made within the framework of an agreement between the member states of the Gulf Cooperation Council (GCC).
Value Added Tax (VAT) has been introduced in Saudi Arabia and the United Arab Emirates for the first time.