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Table of Content

Abstract……………………………………………………………………..3

Introduction…………………………………………………………………4

2030 vision analysis……………………………………………………...…5

· The relation between VAT and 2030 vision………………….….7

The value added tax in the kingdom of Saudi Arabia……………….…….7

· Goods and services that are going to be subject to VAT…….….8

· Application of the VAT law in Saudi Arabia………………….…9

· Advantages and disadvantages of the VAT in Saudi Arabia……13

The VAT in the United kingdom……………………………………….….14

· Application of the VAT law in the United Kingdom………….…16

· Advantages and disadvantages of VAT in UK……………….…..19

· The relationship between the VAT law in KSA and in the UK…..21

Conclusion……………………………………………………………………22

Bibliography………………………………………………………………….23

Abstract

The Value Added Tax “VAT” is an indirect tax that implemented on basically all the goods and services that are sold by businesses with maybe some exceptions that includes basic food items, essential medicines and exports of goods and international services. VAT is a new concept that is going to be implanted in KSA and GCC countries since it is a unified agreement. In particular in KSA the VAT will take effect on January 1,2018 with a rate of 5%.

Since Prince Mohammad bin Salman announced the 2030 vision and what are its main goals, the Kingdom of Saudi Arabia is living huge changes to achieve these goals, and it have been implementing new rules and new concepts in to the country to make the Kingdom of Saudi Arabia a center for global investment, and one of these new concepts is the VAT.

This research will be divided into three main sections, the first section will discuss and analyze briefly the 2030 plan and what is the relation between it and the VAT, the second part will summarize and discuss the VAT in KSA with analyzing its law and discussing it advantages and disadvantages, finally the third section will summarize and discus the VAT law in the UK and what are the advantages and disadvantages with a comparison between the two laws.

Keywords:

2030 Vision, Value Added Tax (VAT), General Authority of Zakat and Tax (GAZT), HM Revenue and Customs (HMRC)

Introduction:

The main purpose of the 2030 vision of prince Mohammad bin Salman is to make the Kingdom of Saudi Arabia a center for global investment. A major element to achieve this goal is the Value Added Tax (“VAT”) . The VAT is a 5% on the increase of the value of products and services as it moves through the production and distribution. While this is an old concept in the United Kingdom, it a novelty in KSA and GCC countries since it is a unified agreement. In particular in KSA the VAT will take effect on January 1,2018.

The aim of this research is to give a clear justification and detailed explanation of the VAT and how it going to implemented and compare it with other countries such as the United Kingdom. Our research methodology is going to be based on inductive reasoning where it is based on primary data and governmental websites.

Our research will discuss three sections, the first section will discuss the 2030 Plan and how it is related to the VAT, the second section will discuss the VAT and how it’s going to be implemented in Saudi Arabia, finally, the third section will compare the VAT in the United kingdom and in Saudi Arabia and how similar they are.

2030 Vision Analysis:

Every success must start with a plan, and a successful plan based on a strong basses. Saudi Arabia is determined to achieve 2030 plan, with its strong and clear vision. One of the main goals of Saudi Arabia vision is to limit the use of oil and gas by creating diversity in economy.

Saudi Arabia is rich in natural recourse, where it doesn’t relay on oil and gas only but have other natural recourses such as gold, uranium and other minerals. That’s why the second goal is to become a global investment powerhouse, the country has a strong investment, which will help us to increase the economy and export more of our natural resources. The third goal is to use our strategic location to connect the three continents, which are Asia, Europe and Africa to become a main international commercial trading.

The fourth goal of Saudi vision is to improve their people abilities. The purpose of the 2030 vision is to build a new country, satisfy the needs of the society and provide all the opportunity to its society. Furthermore, The ambition of Saudi Arabia is to renew its income recourses and make it stronger.

The 2030 vision of Saudi Arabia will begin directly delivering the main goals and programs it has set out. The government and the society can improve and achieve their vision by helping each other. Also, One of the most important sources that Saudi Arabia look to is the silks and competencies of their children to make their potential and build a culture that’s help the society to acquire the necessary.

The economy of 2030 vision is to reward the opportunity by increasing the small businesses and productive families, and attract the talent that they need so they can decrease the rate of the unemployment from 11.6 percent to 7 percent. Long-term investment is one of the most power full elements that will improve our economy by maximize the investment capabilities and launch the promising sectors to privatize the government services so it will increase the public investment funds asset over 7 trillion Saudi riyal.

Furthermore, to increase their economy they will build a unique regional logistical hub, they already invested heavily in the construction of ports, railways, roads and airports. To have a full advantage of these investments, they plan to work with a private sector and enter into a new series of international businesses to complete, improve and link our infrastructure internally and across borders. Also, they will unlock the “hard” infrastructure with systems that can drive higher performance, including more rigorous governance, leaner processes and a more efficient customs system. Saudi Arabia will improve and implement existing laws and regulations. Air, maritime, and other transport operators that will be encouraged to make the most of their capacity, achieving durable links between existing trade hubs, as well as opening new trade routes. This will reinforce its position as a distinctive logistical gateway to the three continents.

Moreover, improve the business environment and create a special zone in good and competitive locations. It shall take into account the comparative advantages of the Kingdom’s different regions, assess their probability for promising sectors, and then establish special zones, such as logistic, tourist, industrial and financial ones. Also, Special commercial regulations to increase the investment possibilities and diversify government revenues that will be applied to these zones. Also, Saudi Arabia vision hopes to increase the participation of women’s works face, the Saudi women’s will get a big role in this vision.

The relation between VAT and 2030 vision:

As it is shown in the 2030 vision analysis that one of its main goals is to increase the Kingdom economy and its revenues to provide a better life for its people. Tthe VAT is considered one of the main sources of revenues to the government in other countries such as the UK, and that what the Kingdom of Saudi Arabia is going for. Where the VAT is expected to generate around 57SR billion to the national treasure which supports the 2030 vision.

The value added tax in the kingdom of Saudi Arabia:

The Value Added Tax “VAT” is an indirect tax that is implemented on basically all the goods and services that are sold by businesses with maybe some exceptions that includes basic food items, essential medicines and exports of goods and international services. The VAT is an old concept that is applied in more than 160 around the world, where it is considered a secure source of revenue for state budget. It is a process where the tax is imposed on each stage of the supply chain, from the stage of production and distribution till the final stage which is the sale of the good or service to the consumer. The way it works is like a cycle, where the consumer pays the VAT cost on the purchased good or service and the businesses in return will pay the government the VAT collected from the consumers and refund the TAX paid to the suppliers.

On June 2016, the GCC countries made a unified agreement to apply the VAT across the GCC region, according to this agreement on February 2017 Saudi Arabia ratified the VAT framework and was committed to introduce the VAT with standard rate of 5% with effect from January 1, 2018.

The responsible authority for managing the implementation, administration and enforcement of the VAT in Saudi Arabia is going to be The General Authority of Zakat and Tax (GAZT), where it must do it with the coordination of other relevant authorities and entities.

Goods and services that are going to be subject to VAT:

All the goods and services that are going to be subject to the VAT are going to increase by the rate of 5%. In the food and beverages sector, all the food and beverages are going to be subject to VAT, for the transportation sector only domestic transportation is going to be part of the VAT with the exception of international transportation, transportation services for goods and services outside the kingdom, supply of a qualifying means of international transport and finally supply for replacement and repair services for qualified transport (with special terms)[footnoteRef:1]. For the real estate sector , commercial sale and rent, residential sale, hotels, guest houses motels and serviced accommodation rent are all subject to VAT, with the exception of residential rent and rent of housing for students[footnoteRef:2]. In the education sector only private education is subject to VAT since public education is out of the scope, and the same applies to the healthcare sector where only private healthcare is included with the exception of public healthcare and the list of medicine and medical equipment issued by the ministry of health and the Saudi Food and Drug Authority. For domestic oil and gas sector, all of oil, oil derivatives and gas are subject to VAT but in the investment of gold, silver and platinum, if it’s more than 99% pure and tradable in global market then it’s not subject to VAT but if it was less than 99% pure then it subject to VAT by 5%. For financial services, only explicit fee, commission or commercial discount and insurance products including health insurance are subject to VAT, the exempted services are margin based products, operations for any current, deposit or savings account, insurance services and life reinsurance, interest or leading fees charged with an implicit margin for any form of lending and that includes loans and credit cards, interest or lending fees charged with an implicit margin for fiancé and finally issue or transfer of debt security or any transferable monetary amount. All government activities which are the public services that are provided by the government authorities such as the renewal of passport, driving licenses, national ID are not included in the VAT because they are out of scoop. And finally all exports outside of the GCC countries and all services provided to non-GCC residents is not subject for the VAT . [1: See Gov. Report ” Value Added Tax - Implementing Regulations” available on https://www.vat.gov.sa/sites/default/files/Value-Added-Tax-Approved-Implementing-Regulations-Bilingual.pdf ] [2: See Gov. website available at https://www.vat.gov.sa/en/about-vat/law-regulations]

Application of the VAT law in Saudi Arabia[footnoteRef:3]: [3: See Gov. Report “Kingdom of Saudi Arabia VAT Manual” available at https://www.vat.gov.sa/sites/default/files/2017-11-2/VAT_Manual_English_16_Nov.pdf ]

Saudi Arabia is the first country from the GCC states to put out a draft for implementing regulations for the VAT so the people can have a general idea of how the VAT is going to be implemented. The draft for implementing regulation included 77 article, but now and because it’s going to be implemented in January 1, 2018 it has been finalized to 79 articles, the final law has been issued on July, 2017 with 53 articles .

The law starts with stating the most important definitions and preliminary provisions, article 2 states that VAT is going to be applied on most of the supplies, goods, service and on imports. Article 3 states the taxable persons are those who have economic activities that are subject to VAT, despite if it’s a primary or supplementary occupation, and despite where, all persons or businesses who has taxable sales in the past twelve ,months or is expected to have taxable sales in the next twelve months and exceed SAR 375,000 are required to register for, collect and remit VAT, however businesses who are in between 187,500-375,00 SAR can choose to register for VAT or not. Furthermore, the law allows for group of companies to register as a VAT group which is defined as group of entities, persons who register as a group are going to be treated as single taxable person. The standard rate in all the GCC countries is going to be 5% except for the goods and services that are not a subject for VAT it going to be zero rate. For registration, businesses with an annual taxable sales that are over 1,000,00 SAR must register by December 20,2017 and business who are under 1,000,00 SAR muster register by December 20, 2018. For businesses who are not in KSA but make VAT –eligible sales and purchases in Saudi Arabia are required to register and pay the VAT and must assign a tax representative that is base in KSA, generally the registration for the VAT is online through the General authority of zakat & tax website.

All registered businesses are require to provide a tax invoice documenting revenue and tax information on al taxable sales, invoices must be issued within 15 days of the date of payment. The invoice must include certain information and details related to the transaction such as the invoice issue date and the date of supply, the supplier legal name, address and tax identification number, the unit price not including the tax, the total tax payable in SAR, and furthermore information. The invoices should always base their sums in Saudi riyals, and if it was occurred in another currency the taxpayer should use the daily conversion rate of the other crunchy to provide it in Saudi riyals. Registered businesses are also required to maintain records for minimum of six years after each tax period, in case of audit from GAZT, and they are required to maintain their records and books of account inside KSA, and this also applies to non-resident taxpayers where the representative of the business is responsible for records maintenance.

The law also set rules for place of supply which means where the tax is going to be levied where it does not always the country where the value is created as the supply of goods and services are not always apparent, so there are some special rules that apply in special circumstances, and these rules specially applies when dealing with imports from inside and outside of GCC countries. An important thing that businesses must note is to distinguish between zero-rated and exempt supplies, as the zero-rate imposes a registration obligation upon the supplier but allows the supplier to reclaim the VAT expended in the supply chain process that leads to the supply of goods and services, how if its exempted the supplier cannot deduct any VAT charged to the supplier during the supply chain process.

The law deals with the procedures, administration and period of the VAT and which tax returns must be submitted, where taxpayers must file their VAT returns and pay their tax by the last day of the month following the end of that tax period, tax periods will always end on the last day of the month so the returns will be due on the last day of the following month. Furthermore, VAT deduction and refunds, where taxable business can deduct VAT paid on goods or services purchased from registered suppliers, there are three categories that are eligible for input goods which are taxable suppliers internal suppliers and taxable imports from outside suppliers. Input must be deducted in the tax period when the supply is invoiced and if it was approved then only the VAT input can be deducted. However there are four sectors of purchases that are ineligible for input deduction, first, the tax that is paid on sports, entertainment and cultural services, second is the tax paid on catering services in hotels, restaurants and similar venues, third is tax paid on restricted motor vehicles which are the vehicles that are not exclusively for company services or intend for resale, finally is input taxes paid on any other good or services used for private or non-bossiness reasons. For tax refunds, a taxpayer is eligible for VAT in three cases, if the total VAT for a business is negative because their input VAT exceeds their output VAT, second, if businesses has paid GAZT more than it owed, and finally if the credit balance of VAT for a business’s ends up with a positive balance. The law also considered extensions for tax payers who are unable to pay VAT when its due, where a taxpayer can request an extension from GAZT in writing including the amount due, the tax period associated and why paying in time is not possible, within 20 days GAZT will replay with its approval or rejection.

The law included penalties and fines for not complying with rules, if a business owner submitted a false document to avoid paying the VAT or to reduce or if the he moved goods in and out KSA without paying the vat due it the fine will be paying more than the amount due or less than three times the value of the goods or service. If the business owner didn’t register for the VAT in the specific timeframe the penalty will be paying 10,000 SAR . when a business owner doesn’t file a VAT return in time he get a 5-25% of the VAT due as a fine when he don’t pat the VAT on time he pays 5% of the VAT due for each month. If a business owner collected the VAT without being registered in GAZT the associated fine would be paying up to 100,00 SAR. And finally if the business owner doesn’t maintain books and records as in the regulations, prevent the employees of the GAZT from preforming their duties or violates any provision of the VAT regulations or the VAT law the penalty would be paying up to 50,000 SAR.

Finally, For dispute settlements and appeals there are two independent committees will be assigned to manage taxpayer appeals, they will be a sub-set of committee for the settlement of Tax violations and disputes. The VAT first instance committee is responsible adjudication of violations, disputes and claims of public and private rights resulting from the enforcement of tax regulations. The second committee is the appeals committee and its responsible for adjudication on objections made against the first instance committee decision taxpayers have the right to appeal against the decision that are taken by GAZT within 30 days of the date of notification, they present their appeals to the VAT first instance committee and if it ruled and the taxpayer disagree with the decision, then he have an extra 30 days to present a second appeal to the VAT appeals committee, after reviewing the decision the committee will issue a decision that shall be final and cannot be appealed against before any other judicial authority.

A final note that should be taken into consecration and the law had considered it is the transitional phase and that is specifically for contracts, the “grandfathering rule” where contracts didn’t anticipating VAT will be treated as zero-rated until the earlier expiry or renewal of the contract or the 31st of December 2018, but if they followed the conditions that are set by the law which are the contracts that were signed before May 2017, the taxable suppler is entitled to deduct the full input tax in respect of the supply of goods or services of refund of the tax and the customer should provide a written conformation to the supplier that the full input tax can be deducted from the supply.

Advantages and disadvantages of the VAT in Saudi Arabia:

Since the VAT is a new concept in Saudi Arabia and it had not been implemented yet, so there isn’t any clear or real advantages or disadvantages that have been experienced yet, but there are some general advantages and disadvantages that have been experienced from another countries who had the VAT going on for several years.

Advantages:

The most important advantage of the VAT is how does it affect the economy, where it is a main source of revenue to the government and it can affect the economy in a number of ways going from national and local economic growth to international , and how individuals would manage their personal finance. When comparing the VAT to other type of taxes, the VAT has a less chance of evasion where it minimizes getting away from paying it due to its catch-up effect where it is implemented at each stage of the supply chain. Another advantage could be that it is simple to administer if it was executed correctly compared to the other indirect taxes. One of the most important advantages that VAT is considered one of the type of taxes that has a minimum burden to the consumer, where its collected in small bits at different stages of the supply chain which is production and distribution.

Disadvantages:

For taxpayers the VAT could be very costly because its implemented on each stage of the supply chain so it’s based on the full billing system. at the beginning the VAT could be a little bit complex to understand especially for the countries that are not experienced with it like Saudi Arabia, and that’s because of the calculations of the VAT in every stage of the supply chain. If the consumer was not aware of the VAT and didn’t have enough knowledge about it the VAT will not be implemented successfully and that will result in tax evasion. Finally, VAT is one of the types of indirect taxes that doesn’t have acceptance from the consumer, because the total price of the good or service that will be subject to VAT is going to be effected and the price will increase by the rate of the VAT, in the case of Saudi Arabia each good or service that is subject to VAT it price will increase by 5%.

The VAT in the United kingdom:

History:

In 1973 United Kingdom introduced the value added tax at a rate of 10%. In 1974 this was cut from 10% to 8%. On 1975 the VAT was levied to the luxury rate on a several things at rate of 25%. The difference between the two rates and the range of anomalies in the relative taxation of items falling in different categories led to the 25% rate being reduced to 12.5% in 1976. However, the administration of the two rates is so difficult and further income was required to permit decreases in the rates of income tax. In 1979, the two rates of VAT were combined at 15% much later, following the poll tax disaster. In 1991 a substantial slice of local government taxation was also changed by a further increase in the rate of VAT to 17.5%.

VAT is not payable at a single amount nor is it fully comprehensive. The standard rate of 17.5% applies to roughly 55% of total consumer that spending a law rate of 5% that apply for the domestic fuel and power and a few other goods, and a 0% rate are applying to the society needs such as the food, children’s clothing. The meaning of 0% rate is sellers are not charge the VAT on the sales. However, they still have the right to credit for the input VAT paid, that’s mean that’s the goods are a VAT free. Also, there is a VAT exempt on the services, goods, renting on houses, healthcare, insurance and finance and betting and gamming. That’s mean that the seller doesn’t have the right to charge VAT on the sales, also they doesn’t have the right to re-claim VAT paid on the inputs to production.

In 2008 the pre-budget reports (PBR), there was an announcement form the government says that it would be cut on the standard rate of the VAT form 17.5% to 15% and that will start from the first of December 20018 to the 31 of December 2009. And the goal of this announcement is to stimulate the consumer demand and reducing the depth and the duration of the recession. However, that was dismissed in some quarters because that will weak the public finances, but there will be a little increasing in the macroeconomics.

Professor Olivier Blanchard says that the: “International Monetary Fund’s chief economist, has been quoted as saying: ‘Temporarily cutting VAT, a measure that was adopted in Great Britain, does not seem to me to be a good idea – 2% less is not perceived by consumers as a real incentive to spend’. Leaders of the main UK opposition parties have also criticized the policy, with Nick Clegg saying: ‘We would not waste £12.5bn on the VAT cut which the Prime Minister has delivered, which we don't think makes much difference while David Cameron is already using the past tense to speak about the failure of the policy: ‘The VAT cut has been an unbelievable and expensive failure. This government, that lectured us about prudence, has spent £12.5bn of our money, and wasted it”[footnoteRef:4] [4: See O.B., ”Value Added Tax” on P.199 available on https://www.ifs.org.uk/budgets/gb2009/09chap10.pdf. ]

From 2011 the VAT rate has increased from 17.5% to 20% , till 2017 the VAT rate didn’t change even the exempted transactions such as postage stamps, financial and property transactions, where now days the VAT generates up to £120.4 billion.

Application of the VAT law in the United Kingdom[footnoteRef:5]: [5: See Globig, “Value Added tax” available on https://platform.globig.co/knowledgebase/UK/product-localization-for-the-uk/value-added-tax-in-the-uk ]

In the UK the VAT applies to VAT registers businesses who supply goods and services to customers, the authority that is responsible about the VAT in the UK is the HM Revenue and Customs (HMRC). The businesses that are required to register in the (HMRC) are the businesses that their turn over is more than £85,000m but they are not required to register if what they sell is not subject to VAT or exempt. Businesses that are below £85,000 can register voluntary, and a good reason to register is to reclaim the VAT that the business spent on the purchases and expenses, for example the VAT that the business pays for purchasing the supply’s for the business. VAT registered business have the obligation to charge VAT on every good or service that they sell, and report the amount to (HMRC) where that is done through VAT return which is submitted every 3 months, where business after that may reclaim the VAT that they have paid from the government.

In the UK there are three VAT rates and it’s the business responsibility to ensure that its charging the correct rate. The first rate is the standard rate which is 20%, this applies to the most goods and services unless its classified as reduced or zero rate, the second rate is the reduced rate which is 5%, this type depends on the good or service that is being provided and what are the circumstances of the sale are, and finally the zero rate which is 0%, this includes the goods and services that are considered VAT taxable but the rate is 0%, where al zero rate transaction must still be reported in the tax return. If the transaction is one of these three types then the business must make sure that it charges the correct rate of VAT, calculate the VAT for a single price that either includes or excludes the VAT, the business must keep invoices and must show the information of the VAT on these invoices, finally the business must record the transaction on his the VAT account which is a summary of the VAT and must show the amount of the VAT return.

Businesses cannot charge the VAT on out of scoop items or exempt, but the businesses can sell goods and services to charity at reduced or zero rate, but the charity must be eligible and must apply to the criteria and it’s the business responsibility to check that. Furthermore, the business can charge VAT on goods and services that it sells on discount or deals and it doesn’t have to pay VAT on free samples if they meet the criteria and it’s the business responsibility to check that. The deadline for submitting the VAT return online and paying it to (HMRC) are usually the same first day of the month and 7 days after the end of an accounting period, it must be paid electronically through direct debit or internal banking

The law requires that all businesses that are registered to VAT must keep records of the sales and purchases, keep a summary of VAT which VAT account, and finally issue VAT invoices to (HMRC), the business must have a modified invoice for retail supplies over £250 and a simplified invoice for retail supplies that are under £250, the invoices must be issued within 30 days of the date of supply or date of payment. The records that the businesses keep must be at least for the last six years, the records can be kept on papers, electronically or on software programs. The most important thing is the records must be complete, readable and accurate, where (HMRC) can visit the business at any time to inspect the records keeping and may charge a penalty if the records are not in order.

Unlike other taxes in VAT the (HMRC) gives the tax payers some freedom regarding late submission of returns and late payments before issuing any penalties. If the business VAT return was not received by the deadline or the full payment of any VAT owed is not paid by the deadline the (HMRC) at the first time will record an initial default without issuing a penalty or surcharge which means an extra tax. After that the business inters a 12-months period which is the surcharge period, if another late payment have occurred during the 12 months a further 12 months are extended and the business may start to pay an extra tax on the VAT owed. The (HMRC) have issued a guide to the VAT surcharge that may apply in the 12-month period, if it was the second default during the 12 months then there will be no surcharge for businesses who have an annual turnover that is less than £150,000, but the businesses who have a turnover more than £150,000 will have surcharge by 2%. If the third time occurred then the businesses who have an annual turnover that is less than £150,000 would have a surcharge by 2% and businesses who have a turnover more than £150,000 will have surcharge by 5%. If fourth time occurred then the businesses who have an annual turnover that is less than £150,000 would have a surcharge by 5% and businesses who have a turnover more than £150,000 will have surcharge by 10%. If fifth time occurred, the the businesses who have an annual turnover that is less than £150,000 would have a surcharge by 10% and businesses who have a turnover more than £150,000 will have surcharge by 15%. Finally if the default happened for the sixth time then both type of businesses will have a surcharge by 15%. (HMRC) can also charge further penalties, if any tax was under stated or was over stated and the business sends an inaccurate VAT return in this case the (HMRC) will charge 100% extra, if the (HRMC) sends a bad assessment to the business and it doesn’t advise that it is incorrect within 30 days the a 30% penalty would apply, and finally a £400 penalty if the business submits the VAT return online and the (HMRC) asked it to submit it by paper.

Regarding disputes and disputes resolution about VAT decisions in the UK the (HMRC) is responsible for issuing the decisions[footnoteRef:6], and if a business a query about a VAT decision they can contact the (HMRC). The (HMRC) is responsible for sending decision letters and it will include if the business can appeal or not, where the business cam appeal in four cases if the tax bill was the issue, claiming for tax relief, requesting a specific information or a request to check the business records, finally appealing against a penalty for example a penalty for failing to pay tax returns. The business owner can appeal against the decision within 30 days and as for a tax tribunal to hear the appeal, or consider some alternative dispute resolution (ADR) which aims to help in resolving disputes or get an agreement on the issues that need to bee taken for a legal ruling. [6: See Gov. website available at https://www.gov.uk/guidance/tax-disputes-alternative-dispute-resolution-adr ]

Advantages and disadvantages of VAT in UK:

Since the VAT is an old concept in the United Kingdom and it had been implemented for more than 30 days , there are some clear and real advantages or disadvantages that have been experienced, especially for businesses that have the obligation to register for VAT.

Advantages:

The most important advantage of the VAT in the UK is how did it increase and effected the economy, where it participates every year in increasing the revenues, in year 2016/2017 the VAT generated up to £120.4 billion. The VAT also contributed in building a strong infrastructure for the UK and a secure trading center for businesses. For businesses there are few advantages that they get from registering for VAT, the first advantage can be shown in the ability to recover the input VAT on any purchase made in the supply chain process, it gives credibility for the businesses that are registered and that does open the doors for small businesses to start working and trading with larger businesses, and finally businesses who are registered in the VAT have a greater scope in sourcing supplies, where some suppliers outside the country only deal with the businesses that are registered in VAT.

Disadvantages:

There are some disadvantages that have been noted regarding the implementation of the VAT. where some people think that the VAT illustrates some legal and administrative issues such as shifting from literal approach to the interpretation of tax law to a more purposive approach. And some see the VAT as an obstacle for businesses to come and invest in the UK due to the VAT that they have to pay. Regarding the businesses there are some disadvantages for registering for VAT, where they will have to pay a quarterly or monthly VAT return to (HMRC), the have the duty to raise VAT invoices whenever they make any transaction, it’s their duty to make sure that they are charging the right amount of VAT on the goods and services they sale or else the get penalty, and finally it can add some administrative burden on the business it sell to maintain the records.

The relationship between the VAT law in KSA and in the UK:

From the analysis that we have done we can see that the UK is like the mirror towards the future of the VAT in KSA, where through it KSA could see what are the possible advantages and disadvantages that they might face and what obstacles that they may go through. Regarding the law itself there are some similarities and differences, where the UK and KSA are similar in the way that they collect the VAT and the rules that the assign for keeping invoices and records, but different in the rate where the UK have a rate of 20% but there is reduced VAT especially to essential goods and services, but Saudi Arabia have a flat rate of 5% that applies to all goods and services that are subject to VAT.

Conclusion:

This paper focused on providing an academic analysis for the VAT in the Kingdom of Saud Arabia by discussing the 2030 plan, the VAT in the Kingdom of Saudi Arabia and compare it with the United Kingdom. The research used inductive reasoning methodology where it used electronic resources and books. The aim of our paper is to give a critical analysis for the VAT law and its limitation before its implemented on January, 2018 and how the VAT in KSA could be effected by the experience of the VAT in UK and may take their way of applying the VAT after two or three years of applying it where there will be VAT reform and it will make more sense to have a higher VAT on luxurious goods and a lower VAT on the essential goods and services such as food and insurances.

Bibliography: