Saudi Arabia has implemented a new regulation allowing tourists to claim refunds on the 15% value-added tax (VAT) paid on eligible goods and services, a move meant to strengthen its position in the competitive Middle East tourism landscape, where destinations like the UAE and Qatar have long offered VAT refunds to visitors.
Under the new system, approved service providers will refund the VAT to tourists upon their departure from Saudi Arabia, according to a statement from the Zakat, Tax and Customs Authority.
The impact on the tourism sector could be twofold.
First, it may increase spending among leisure and shopping travelers, particularly in urban hubs like Riyadh and Jeddah, which are positioning themselves as luxury and retail destinations.
Second, it may support the government’s broader Vision 2030 goals by encouraging longer stays and repeat visits.
The development follows a broader trend of regulatory reform aimed at boosting non-oil revenue while promoting international visitation. The move could particularly benefit sectors such as hospitality, high-end retail, and entertainment, which have seen rapid growth alongside the government’s investments in giga-projects like Neom and the Red Sea development.
The introduction of the VAT refund scheme also coincides with significant investments in Saudi Arabia’s retail infrastructure.
Last month, Saudi Arabia’s sovereign wealth fund announced the formation of a new company dedicated to duty-free retail, the latest initiative in the kingdom’s efforts to attract global travelers.
In Riyadh, the Diriyah Square project stands out as a major development. Part of a $62.2 billion initiative, Diriyah Square is set to feature over 400 retail outlets and 100 dining establishments.
Jeddah is also witnessing substantial retail growth. The Jeddah Central project, with a budget of $20 billion, aims to transform the city’s central area into a hub for commerce and tourism. The project plans to include 2,700 hotel rooms and 17,000 residential units.
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