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VAT in Gulf Co-operation Council (GCC)

In 2017 Representatives of the GCC  signed a VAT Framework Treaty confirming the introduction of a formal VAT system in the six GCC Member States; Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the UAE.  

VAT has since been introduced in Saudi Arabia and the UAE on 1 January 2018 at a rate of 5%

Whilst there is currently no certainty on an implementation date for the remaining GCC members it is likely to be later in 2018 in at least some Member States.

The VAT framework treaty provides that VAT will be charged at 5% initially but there is also scope for zero-rates and exemptions.  This means that, similar to the European VAT system, there will be flexibility on the application of VAT in each Member State and there is likely to be an impact on sectors where the VAT exemption may apply, including

  • Education
  • Healthcare
  • Financial Services

Complications are also likely to arise in sectors involving zero-rated services or electronic services such as:

  • Construction Industry
  • Transport
  • Technology and telecommunications

Businesses should also be aware that VAT has implications where there are charges between related businesses that may not currently be recognised in the business accounts and where there is cross border trade between such companies, where money may not change hands but goods are moved.

CVC is well placed to advise on the implementation of VAT in any of the GCC countries due to its knowledge and experience in the EU VAT system and its working arrangements in the GCC. We are aware of the potential pitfalls and also how businesses can be structured to gain the most advantageous VAT result. In the GCC countries, where tax has not been an issue in the past, businesses may find that their accounting systems must be radically modified to deal with the introduction of VAT. 

The services we can provide include:

  • Initial training on implementing VAT in your business
  • Ongoing support and assistance in submitting returns
  • Systems reviews
  • VAT planning