Saudi Arabia is set to implement a Value-Added Tax (VAT) refund system for tourists starting in 2025. This initiative, outlined in the Kingdom’s 2025 budget, will be overseen by the Zakat, Tax, and Customs Authority. The system is designed to streamline tax compliance for international visitors while enhancing their overall travel experience, aligning with Saudi Arabia’s efforts to position itself as a premier tourist destination.
Tourism as a pillar of economic diversification
The VAT refund system comes as part of broader reforms aimed at diversifying Saudi Arabia’s economy under Vision 2030. The tourism sector has been a central focus of these efforts, with the Kingdom targeting 127 million visitors by the end of 2025.
This ambitious goal includes both domestic and international travelers, supported by initiatives like the development of new cultural and leisure attractions, large-scale events, and luxury accommodations.
In 2023, Saudi Arabia welcomed 104 million tourists, surpassing Vision 2030’s initial milestone seven years ahead of schedule. These visitors contributed to a robust US$49.95 billion in tourism revenues, and the government aims to increase this figure to US$93.58 billion by 2025. Notably, nearly a quarter of these visitors were international, demonstrating Saudi Arabia’s growing global appeal.
The VAT refund system will allow eligible tourists to reclaim a portion of the taxes they pay on purchases within the Kingdom. This measure mirrors similar systems in popular tourist destinations like the UAE and European countries, which use VAT refunds to incentivise higher spending among international visitors. This move is expected to further attract high-spending tourists, including those interested in shopping at Saudi Arabia’s luxury retail outlets.
Saudi Arabia’s new VAT refund system represents a compelling new selling point for high-end travellers interested in the Kingdom’s world-class shopping, cultural heritage, and hospitality. With a well-defined strategy to increase non-oil revenues and support private sector growth, Saudi Arabia offers a dynamic and expanding market for luxury tourism. Travel advisors are now able to highlight the government’s commitment to visitor-friendly policies, which now include this VAT refund initiative.
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