The Saudi Arabian government has decided to revoke the existing blanket Value Added Tax (VAT) of 15 percent imposed on real estate deals and has introduced a lower 5 percent slab for the sector.
The move which is seen as a decision to revive the stalled economy post severe oil price drops and the pandemic’s effect was revealed by Saudi Finance Minister Mohammed Al-Jadaan on twitter.
“The Royal Order aims to support citizens and ease their burden and enable them to own homes, and helps develop the kingdom’s economy by spurring the residential and commercial property sector,” the tweet said.
Battling a deep recession, Saudi Arabia’s economy has shrunk by 7 percent in the second quarter with unemployment hitting a record high of 15.4 percent
Earlier in June, the Kingdom had hiked a 5 percent VAT to 15 percent for all non-oil transactions to spur revenue inflows to the government which was struggling with the economic effects of COVID-19.
Through the new decision, the government will bear the cost of the new Real Estate Transaction Tax “for up to $266,616 (SAR 1 million)” for Saudi citizens purchasing their first home.
Saudi housing minister expects that the decision will support the nation to achieve its target of boosting housing ownership by Saudis to 70% by 2030 in a country with an overwhelmingly young population.
According to a preliminary budget statement, the world’s largest oil producer is expected to reduce its overall spending by 7.5 percent in the next year’s budget. The document has also projected a 12 percent budget deficit for the country in the current year with a lower 5.1 percent deficit in the 2021 budget.