RIYADH: Saudi Arabia’s king on Friday issued an order exempting real estate deals from a 15 percent value-added tax (VAT) and imposed a new 5 percent tax on transactions as the Gulf state moves to revitalize an economy hit by low oil prices and the COVID-19 pandemic.

The finance minister said on Twitter that the order, carried on state media, also aimed to support Saudi citizens who want to buy homes. The world’s largest oil exporter is facing a deep recession, with the economy shrinking by 7 percent in the second quarter and unemployment hitting a record high of 15.4 percent.

The government had in July tripled VAT to 15 percent to boost non-oil revenues, but the move has limited domestic demand. “The royal order aims to support citizens and ease their burden ... and enable them to own homes, and helps develop the kingdom’s economy by spurring the residential and commercial property sector,” Finance Minister Mohammed Al-Jadaan tweeted.

De facto ruler Crown Prince Mohammed bin Salman has launched an ambitious plan to diversify the economy and create jobs for millions of Saudis. The government has said it is committed to the plan but that programs would undergo “structural improvements” and be reprioritized to spur growth.

The royal order said the government would bear the cost of the new Real Estate Transaction Tax “for up to 1 million riyals ($266,616)” for Saudi citizens purchasing their first home. The housing minister said the move would help achieve a target of boosting housing ownership by Saudis to 70 percent by 2030 in a country with an overwhelmingly young population.

Saudi Arabia plans to cut spending by 7.5 percent in next year’s budget, according to a preliminary budget statement that forecast a 12 percent budget deficit for 2020 and a 5.1 percent deficit next year. — Reuters