Saudi Arabia’s General Authority for Zakat and Tax (GAZT) registered 3,542 value-added tax (VAT) violations in the first two months of the tax’s implementation.

Gazt said that the violations were registered against businesses that failed to comply with VAT implementing regulations.

The violations were detected across several areas of the country for the months of January and February, with 28 percent of them detected in Makkah, 19 percent in Riyadh, 13 percent in the Eastern province and the rest in other parts of the kingdom, the authority tweeted in Arabic through its official VAT-dedicated twitter account.

The violations ranged between four categories that included eligible entities not registering for VAT, issuing invoices that do not include the required VAT information, charging VAT at a rate above 5 percent, and not including the VAT identification number on an invoice.

The authority urged consumers to use a recently-launched VAT mobile application to confirm whether a business is VAT-registered or not, and to report any violations they detect to the authorities.

A fine of 10,000 Saudi riyals will be imposed on businesses that are mandated to register for VAT but fail to do so. Any evasion of VAT will lead to a fine of at least the amount of the tax due and at most three times’ the value of goods and services subject to evasion. (Read more here).

The kingdom’s VAT law also states that filing an incorrect tax return which results in lower tax would result in a penalty of 50 percent of the difference between the correct due amount and the incorrect calculated tax.

While Saudi Arabia is set for higher economic growth this year supported by stronger oil prices as projected by the International Monetary Fund (IMF), the introduction of new taxes including VAT from the beginning of this year is expected to lead to higher inflationary pressures in the kingdom. (Read more here).

Saudi Arabia and the United Arab Emirates both introduced value-added tax on January 1 this year. Although all six Gulf Cooperation Council states signed an agreement in 2016 to implement VAT, to date they are the only two states to do so.

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(Reporting by Nada Al Rifai; Editing by Michael Fahy)
(nada.rifai@thomsonreuters.com)

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