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Saudi Arabia: Increase in customs duty rates announced by Saudi Government

16 June, 2022

In brief

The Government of the Kingdom of Saudi Arabia (KSA) has announced an increase in the customs duty rates for an extensive range of goods, including live animals, foodstuffs, mineral, chemical, plastic, glass products, base metals (namely aluminium), machinery, equipment and electrical equipment and vehicles. The measure affects a total of 17 Chapters and 99 Tariff Lines of the KSA Integrated Customs Tariff for the purpose of protecting and encouraging national industries and local agricultural products. The announced increase in customs duty rates entered into effect on June 12, 2022.

In detail

Proposed changes to the KSA Integrated Customs Tariff

The Government of KSA has decided to increase the customs duty rates for an extensive range of goods. A total of 17 Chapters and 99 Tariff Lines of the KSA Integrated Customs Tariff are impacted. The full list of products was officially published on 12 June 2022 and can be accessed through this link (only the Arabic version is currently available): HS codes subject to increased duty rates.

For ease of reference, we have listed the main categories of goods that will be subject to higher customs duties, starting 12 June 2022, below:

  • Live animals

  • Foodstuffs

  • Mineral products

  • Chemical products

  • Plastic products

  • Glass products

  • Base metals, namely aluminium

  • Machinery, equipment, electrical equipment

  • Vehicles

What can I do to minimise the impact on my business?

The changing trade landscape has become a constant source of uncertainty for companies. More importantly, tariffs impact all aspects of an organization and have a direct impact on profitability.

As the customs duty rates have been significantly increased, it is critical for businesses importing goods in KSA to consider the possibility of reviewing their customs and international trade policies to ensure an efficient duty management.

Some of the options that importers can consider, in accordance with the applicable customs rules and regulations in KSA, may include:

  • Exploring alternative sourcing, focusing on the KSA local market and Free Trade Agreement (FTA) partners, such as the GCC and other Arab countries, Singapore, Switzerland, Norway, etc.

  • Considering applying for, or extending the customs duty exemption for industrial activities.

  • Exploring the use of the growing number of bonded warehouses and bonded zones across the KSA to store goods under duty suspension, i.e. deferring the payment of goods intended for the local market, and avoiding the payment of duties for goods to be re-exported from KSA. 

  • Evaluating the use of the temporary admission relief for goods imported for a limited period of time.

  • Considering the review of the customs valuation policy, unbundling non-dutiable costs.

  • Considering the review of the tariff classification policy, focusing on streamlining the use of tariff lines.

  • Reviewing the contractual terms with suppliers and logistics service providers to minimise the supply chain costs associated with the imports in KSA.

  • Discussing the changes with customs brokers and third party logistics service providers to ensure compliance and avoid potential fines. 

  • Evaluating the potential impact that the increased duty rates have on the VAT, Transfer Pricing and Corporate Tax/Zakat positions of businesses operating in KSA. 

It is also important to consider the use of digital automated trade solutions (many of which may exist in native ERP environments or can be added with additional software packages). These solutions can automate and standardize import and export processes across business units, manage customs data in a central location as well as enabling local, regional and global reporting dashboards. This helps reduce risk and provides an extra layer of control surrounding interactions with government agencies. These type of solutions also help organizations manage trade uncertainties by providing real time visibility to customs data that can be used to accurately set prices and provide support in managing profitability and ensuring compliance.

Next steps to consider

The announced increase in customs duty rates as of 12 June 2022 requires that importers in KSA start to consider the necessary changes required to manage the impact on their operations, and comply with the legal requirements in terms of declaring and paying the right amount of customs duty to the Zakat Tax and Customs Authority. 

It is also recommended that importers consider the appropriateness of reviewing their customs and international trade policies to address the impact of the new customs duty rates in KSA in an efficient manner.

 

Contact us

Mohammed Yaghmour

Middle East Tax & Legal Services Leader, PwC Middle East

Tel: +966 56 704 9675

Carlos Garcia

Partner, Middle East Customs & International Trade, PwC Middle East

Tel: +971 (0) 4 304 3936

Mohammed Al-Obaidi

Zakat and Tax Leader, PwC Middle East

Tel: +966 50 525 6796

Fayez Aldebs

Partner, Zakat and Tax, PwC Middle East

Tel: +966 54 400 1037

Yaseen AbuAlkheer

Partner, Zakat and Tax, PwC Middle East

Tel: +966544250540

Fehmi Mounla

Partner, Zakat and Tax, PwC Middle East

Tel: +966 2 610 4400

Chadi Abou Chakra

Middle East Indirect Tax Network Leader, PwC Middle East

Tel: +966 11 211 0400 Ext: 1858

Jay Riche

Partner | TLS Tax Strategy & Transformation Leader, PwC Middle East

Tel: +971 56 385 4717

Mohammad Hussein Amawi

Partner, Zakat and Tax, PwC Middle East

Tel: +966 55 800 9697

Ebrahim Karolia

Partner, International Tax and M&A Services, PwC Saudi Arabia

Tel: +966 11 211 0400 ext. 1771

Mohamed Harby

Partner, Zakat and Tax, PwC Middle East

Tel: +966 56 907 2618

Suleman Mulla

Partner, International Tax, PwC Middle East

Tel: +966 54 122 8051

Mugahid Hussein

Partner, Zakat and Tax, PwC Middle East

Tel: +966 54 425 6573

Wael Osman

Tax & Zakat Partner, PwC Middle East

Tel: +966 13 849 6311

Guido Lubbers

Partner - Indirect tax and fiscal policy, PwC Middle East

Tel: +966 54 110 0432

Rakan AlHiary

Director, Customs & International Trade, PwC Middle East

Tel: +971 50 189 3238

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