Saudi Arabia will apply the standard value added tax (VAT) of five per cent on fuel, the kingdom's General Authority of Zakat and Tax (GAZT) has been quoted as saying.

The confirmation was stated in a reply to an online question whether there would be a VAT rate for petrol, said a report in Gulf News.

"The VAT rate of five per cent for petrol will be applied starting January 1, 2018," GAZT said.

Earlier, GAZT had confirmed that international transport of passengers and goods is zero-rated according to the GCC VAT Agreement.

In addition, GAZT clarified that, according to the VAT Implementing Regulations, services related to international passengers and goods transport are zero-rated, including, but not limited to, excess baggage and seat reservation fees, maintenance, repair and modification of qualified international transport, storage charges, port charges, parking fees, customs duties, customs clearance fees, transport-related fees, air navigation services fees and aircraft crews, which means that businesses and institutions providing these services will not be affected by VAT.

However, GAZT said the local transport of passengers and goods – i.e. within the kingdom – and associated services will be subject to the standard 5 per cent VAT rate, with businesses collecting tax from the traveller upon buying the travel ticket.