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The members of the Gulf Cooperation Council (GCC) – which includes the UAE, Saudi Arabia, Kuwait, Bahrain, Oman and Qatar – signed an agreement to implement Value Added Tax (VAT) in the Region from 1 January 2018.  The UAE and Saudi Arabia have met the 2018 deadline with Bahrain and Oman expected to implement by 1 January 2019.  Kuwait have chose to postpone due to economic reasons and news is still awaited from Qatar.

We have outlined below a summary of how this may impact your business operating in the Region and things you may need to consider when preparing your business for compliance with the VAT rules.

What is the rate of VAT?

It has been agreed that the VAT rate will be harmonised across the GCC at a standard rate of 5% for all countries.

Do I need to register for VAT?

Companies supplying taxable goods or services with an annual revenue of more than USD 100,000 will have to register; those with annual revenue of between USD 50,000 and USD 100,000 will have the option to register. Companies can register voluntarily if expenses exceed the threshold. This opportunity to register voluntarily is designed to enable start-up businesses with no turnover to register for VAT.

Will there be any exemptions from VAT?

Yes, the GCC Framework outlines a list of areas that have been agreed as exempt or zero-rated with some local discretion by the GCC members.  These include:

Exemptions

  • Financial services carried out by licensed banks and financial institutions
  • Transportation may be exempt or zero-rated
  • Education may be exempt or zero-rated
  • Bare Land may be exempt or zero-rated

Zero rated 

  • Cross-border transportation of goods and passengers within the GCC and from/to the GCC
  • Gold, silver and platinum for investment purposes
  • First supply after the extraction of gold, silver or platinum
  • Exports of goods and services to a non-GCC resident where the benefit of the service is outside the GCC

What companies need to do?

Establish whether your business is required to register on a mandatory basis or if it would be beneficial to register on a voluntary basis.

Prepare your financial procedures and processes in order to collect and report VAT to the tax authorities.

Maintain all financial records, including accounts, VAT invoices, books and records for a minimum period of 5 years.

Invoicing

The taxable person will need to issue a VAT invoice when they supply of goods or services, or where full or partial receipt prior to the supply date.

Each Member State will determine the contents of the VAT invoice and the period within which it must be issued.

VAT invoices can be issued in any currency, provided that the value of the VAT is written in the currency of the country where the place of supply is take place.

Non-compliance

Penalties will apply for non-compliance with the tax law, these include:

  • failing to register when required to do so
  • failing to submit a VAT return or make a payment by the due date
  • failing to keep the records required by law
  • tax evasion offences where a person performs a deliberate act or omission to evade tax

How can we help you?

Our experts have more than 20+ years experience with VAT and GST in advanced tax jurisdictions and advise clients operating globally.

We can support you with:

  • Reviewing your contracts in consideration of these changes
  • Implement VAT reporting in your financial accounting system or help you choose and set up a new system
  • VAT training of your in-house team provided by experience international VAT experts
  • Regular updates on new developments and opportunities.

For more information and a free consultation to discuss how VAT impacts your business Contact Us.

Useful Links

XERO Small Business Guide

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Interactive VAT Calculator

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