The basic objectives of the GCC are to afford its members more unity and to formulate, sustain, and develop initiatives that are economic, social, as well as cultural for their progress and well-being. Also, the council has tried in the past to institute a uniform taxation regime called the Value Added Tax (VAT). This is a GCC VAT compliance guide for your reference. The UAE’s VAT registration services can assist your business to thrive in the GCC countries under VAT infrastructure with the help of qualified VAT experts.
What are the GCC VAT legislations and how does Value Added Tax work in the GCC countries?
VAT is a direct tax on consumption with the rate being charged at every stage of manufacturing and the point of sale. Businesses charge the VAT from their customers and remit such amounts to the government less the VAT that they have been charged on the goods. The tax cost is ultimately born by the consumer since over time, firms are forced to adjust their prices upwards to reflect this new cost. All the countries of the GCC board a common VAT rate with a few differences. There are certain limits to the yearly revenue that if a business passes, it has to register itself. Other requirements include proper record keeping and keeping to the necessary deadlines such as the filing of VAT returns.
Read also: Penalties For VAT Deregistration In UAE
What is the VAT in GCC and what are GCC VAT rates?
A Common VAT Agreement was reached in June 2016 by six Gulf Cooperation Council members in order to implement a standard rate VAT system of five percent. The following four of the six member states have previously imposed VAT:
1. The United Arab Emirates
Federal Law (No. 7) of 2017 on Tax Procedures was endorsed by the UAE President His Highness Sheikh Al Nahyan on the 31st of July 2017. It presupposed the groundwork upon which the general framework of VAT in the UAE would be established on. The management and collection of VAT in the United Arab Emirates are under the Federal Tax Authority. As in any other country, registration for VAT in UAE is also done through the tax department. That being said, since the implementation of VAT is now possible to register online in the United Arab Emirates (UAE) starting mid-September 2017, local firms in the said nation have been advised to employ the services of professional tax consultants in Dubai and across the UAE. This will in turn guarantee that the registration application goes through without any hitches and in a short span of time. The general VAT applicable in the UAE is 5%.
2. The Kingdom of Saudi Arabia
In February 2017 Saudi Arabia accepted the GCC structure for VAT. It assured that VAT would be applicable from the first of January in the year 2018. The VAT legislation is administered, enforced and implemented with supervision from the General Authority of Zakat & Tax based in Kuwait. In that regard, it collaborates with other local government organizations to achieve the above. Saudi Arabia being one of the member countries levies a standard rate of 15% as VAT on the goods and products sold in the country.
3. Bahrain
Since the start of the year 2019, Arab society of Bahrain as introduced new laws regarding VAT. An official webpage on the nation’s value added tax, or VAT was developed by the National Bureau of Revenue, NBR. Many businesses in Bahrain might struggle with the comprehension of VAT laws. It is advisable to speak with tax experts to ensure correct interpretation of Bahrain’s VAT laws and complete compliance with all applicable laws. Like UAE, Bahrain also charges 5% VAT on its goods and services.
4. Oman
As for the GCC member state that has implemented most recently the VAT it is Oman. The original goal of the Oman’s VAT system was re-affirmed by Oman’s Minister of Commerce and Industry, Ali bin Masoud Al Sunaidy in an interview with Bloomberg TV at the beginning of this year’s World Economic Forum in Davos. Like all other GCC countries, Omani VAT doesn’t apply to essential foods as same are deemed to be supplying basic food items; but it applies to luxury or non-scarce products /services.
Kuwait and Qatar are the other two nations in the GCC that have not yet adopted the VAT.
GCC VAT registration process and GCC VAT regulations
Businesses that are operating in one of the GCC nations must register for VAT if they have a yearly turnover of more than a determined limit. Making an online account, entering company information, and submitting required files are the steps in the procedure. Businesses are issued a VAT registration number upon approval. Following registration, they have to file returns, keep records, issue VAT invoices, and remit the required amount of VAT.
Read also: VAT Treatment For VAT-Free Promotions
Effects of GCC VAT implementation
The GCC economy have been impacted in a number of ways by the implementation of VAT. Among the principal consequences are:
- VAT has provided a relatively large amount of additional revenue for the governments of the GCC, and has kept fiscal balance intact.
- Price Increases: With the introduction of Value-Added Tax (VAT) it was seen that there was a general raised in the price of products and services, thus affecting consumers and their purchase behavior.
- Business Adjustments: VAT implementation raised the cost of doing business, and the nature of business was changed in one way or another so that the business could be VAT-compliant.
- Economic Growth: VAT is expected to promote long term economic viability and growth diversification even though its impact on the growth Is still questionable.
How VAT registration in UAE can help your business understand the VAT in the GCC regime?
To summarize The GCC’s introduction of VAT has been a revolutionary process with broad ramifications. Notwithstanding obstacles, the overarching goal of promoting economic growth and diversifying sources of income is progressively coming to pass. The VAT regime will probably go through more adjustments as the GCC economies develop in order to solve new problems and maximize its efficiency. Call VAT registration UAE to understand the impact of VAT in GCC and the impact it may have on your business.
To know more about VAT in GCC, contact us here in VAT Registration UAE today!
