Saudi moves to control the used car market and reduce prices

While the Saudi Zakat, Tax and Customs Authority decided to apply the value-added tax calculation to supplies of used cars according to the profit margin at the beginning of next July, Asharq Al-Awsat learned that the new steps came in response to the demands of the Federation of Saudi Chambers, representing the business sector in the country, in A step to regulate and control the local market, as well as reduce the prices of used vehicles.

According to the information, the Federation of Saudi Chambers recently held several meetings with the authority for the purpose of implementing Article 48 of the executive regulations of the value-added tax system, which defines the mechanisms for the supply of used goods, the most prominent of which is that the taxable person may apply to calculate the tax due. For the supply of qualified used goods by using the profit margin method in accordance with the conditions set forth in this Article.

price equilibrium

Specialists told Asharq Al-Awsat that the new decision issued by the Zakat, Tax and Customs Authority is in line with the previous package of measures from the Ministry of Commerce aimed at controlling the car market in Saudi Arabia.

Faisal Abu Shusheh, head of the National Committee for Car Dealers in the Federation of Saudi Chambers, told Asharq Al-Awsat that the decision will balance prices by calculating value-added tax on profit margins, and therefore the addition will be symbolic and contribute to lowering prices.

Faisal Abu Shusheh explained that, in the past year, the Ministry of Commerce took 10 measures based on its role and responsibilities aimed at protecting the consumer from improper practices and reviewing the ways of doing business in the country, indicating at the same time that the efforts made by the government contribute to providing supply to consumers. High demand.

Price gouging

Abu Shusheh added that the previous regime had a significant impact on the used car market by raising the value of the commodity by about 15 percent, and repeatedly calculating the tax more than once on the consumer, in addition to not controlling and following up the market from manipulating the sale of vehicles in the name of the individual and not in the name of the exhibition. .

The head of the National Committee for Car Dealers continued that the new decision by the Zakat, Tax and Customs Authority helps to comply with the regular payment of value-added tax on profit margins, and to prevent fraud in used car sales.

Middle East tours

For its part, Asharq Al-Awsat toured the Riyadh showrooms to find out the consequences of this decision on the local market, to confirm a number of exhibition owners, citizens and residents, the importance of the decision in organizing and reducing the prices of used vehicles in the next stage, explaining that the results will appear in the future in the medium term.

For his part, Muqrin Al-Mutairi, owner of one of the showrooms, explained to Asharq Al-Awsat that the application of value-added tax on profit margins contributes to regulating the market, ensuring that showrooms adhere to regulations and laws, and limiting manipulation in the sale of used cars, stressing that the decision helps reduce vehicle prices. used in the domestic market.

Muqrin Al-Mutairi added that the government is making efforts to control the prices of cars and their availability in the local market in front of global demands, explaining that prices are witnessing a decrease of 10 percent during the current period.

Market regulation

For his part, Yasser Al-Shuwaiqi told Asharq Al-Awsat that the implementation of the procedure on the ground will reduce the prices of used vehicles and contribute to regulating the market, indicating that positive results will appear in the next few months.

Muhammad Abu Hamza agreed with Al-Shuwaiqi’s opinion of the importance of the decision issued by the Zakat, Tax and Customs Authority, to control the prices of used cars after they witnessed a significant increase in the current period, stressing that the competent Saudi authorities have actually started a package of measures that will reduce prices in the future.

Enhance transparency

Recently, the Saudi Ministry of Commerce has taken accelerated moves to protect the local car market from improper practices, after it witnessed a rise in prices and a crisis in delivering vehicles to customers, to take 10 measures, the most important of which are: communicating with manufacturers to increase the share allocated to the Kingdom of the most demanded vehicles, as well as carrying out Dealers give individual consumers priority in providing cars and reduce the share of distributors and showrooms.

Among the measures taken are also the monitoring of distributors and showrooms to ensure that there are no violating practices that are harmful to the consumer, the governance of reservation lists at car dealerships and the promotion of transparency, in addition to providing the ministry with a weekly report on the prices of vehicles with high demand, their quantities, the date of their arrival, and the number of reservation requests.

The Ministry of Commerce obligated car dealerships to publish prices, policies, instructions and special procedures on their websites, and to stop leasing companies from selling new vehicles, taking advantage of the high prices, and ensuring that they are only purchased for the purpose of leasing.