KSA Customs duty rates to increase significantly
The Kingdom of Saudi Arabia (KSA) will significantly increase the Customs duty rates on a number of commodities with effect from 10 June 2020. Businesses within the Fast-Moving Consumer Goods (FMCG), Automotive, Construction, and Oil & Gas sectors may be affected.
Foodstuffs, textiles, steel, building materials, vehicles and spare parts will be hit with a rate increase of 5% - 25% of their dutiable value. The full list of affected commodities has been released and is currently available in Arabic only.
These changes are the latest in a series of responses to the COVID-19 crisis in KSA. With the Value Added Tax (VAT) rate increase to come into effect from 1 July 2020, it is notable that the Government has sought to balance its budget by introducing higher transactional taxes that are traditionally easy to implement and are also efficient in their revenue raising impact.
We would advise businesses to carefully consider the impact on their supply chain. Unlike VAT, Customs duties cannot be recovered or deducted and are likely to form a sticking cost to the business unless they can be passed on to customers. Now is a good time to review the terms and conditions as stated in contracts and the tariff classification for the imported goods to ensure that the correct Harmonized System (HS) code is being use. In addition to this, careful consideration should be taken around the underlying valuation, especially between connected parties (this may also affect the transfer pricing) and the origin of the products. It should be noted that Customs audits can be applied
retrospectively up to 15 years after the declaration has been made.