According to informed sources the commercial and residential real estate sectors will be subject to value-added tax.

Hamoud Al-Harbi, director of the value-added tax project at the Zakat and Income Authority, explained during a workshop organized by the Eastern Province Chamber of Commerce and Industry that certain cases will be exempt, noting that the implementing regulations will clarify this, noting that bank loans are not subject to value-added tax, and pointing out that exempting loans from this tax is a natural step, as imposing a 5% rate on bank loans would increase costs for banks.

Al-Harbi said that the Authority will impose the tax on invoices issued for goods, whether they are in warehouses or newly imported, adding that value-added tax will be imposed on services as well as goods.

Value-added tax (VAT) refers to the tax levied on the difference between the cost price and the selling price of a product; it is an indirect tax imposed on all goods and services except those specifically exempted by decree.It is scheduled to take effect in Saudi Arabia and the rest of the Gulf Cooperation Council (GCC) countries starting at the beginning of next year at a rate of 5%, following the completion of all necessary arrangements.