Gulf Cooperation Council VAT Agreement

Gulf Cooperation Council countries are seeking to develop strategies aims to develop cooperation relations between them, to achieve economic integration, develop similar legal legislation in economic fields, and establish a unified framework for implementing the VAT in the Gulf Cooperation Council countries. This agreement was known as Gulf Cooperation Council (GCC) VAT Agreement

The Unified VAT agreement mandated the application of VAT on supplies of goods and services, and urged each GCC country to reflect the application of its unified provisions in local systems in accordance with the mechanisms followed in each country.

In this article, we will discuss some of the provisions of this agreement – GCC VAT Agreement – and the reality of its application in the Gulf Cooperation Council countries.

GCC VAT Agreement

Gulf Cooperation Council decided at the thirty-sixth (36^th) session meeting held in Saud Arabia capital, Riyadh, December 2015, to discuss and deliberate on unifying the imposition of VAT for the Gulf Cooperation Council countries, and decided that member states must work with this agreement.

VAT in Bahrain

VAT in Bahrain began under in 2019, and Bahrain has adopted a rate of 5%, and this is consistent with the directions of 2018 regarding the VAT and assigned the National Bureau of Revenue to implement VAT in Bahrain, including registration  Those subject to VAT, and verify the accuracy of their tax returns.

Bahrain established a zero-rated VAT list that included:

• Foodstuffs.
• General medical services.
• Public transportation services.
• Oil and gas sector.
• International air travel tickets.

VAT in Oman

Oman has implemented a VAT of 5% in accordance with a royal decree, with the executive regulations being issued after sixty (60) days. This tax is imposed on most goods and services.

Oman established a zero-rated VAT list that included:

• Health and medical care.
• Education.
• Financial services.
• Banking.
• Food.
• Supplies for people with disabilities.

VAT in UAE

The UAE is responsible for providing various services to its citizens and residents, including health services, transportation services, education, police, etc., and the costs of all these services are covered from government budgets.

UAE adopted the implementation of VAT in January 2018 at a rate of 5%. Within the Unified VAT Agreement of the Gulf Cooperation Council, VAT revenues constitute a new source of income for the state, thus ensuring the continuity of providing high-quality services in the future.

UAE Is an integral part of the group of Gulf states that are linked to each other economically through the economic agreement between the GCC countries and the GCC Customs Union Agreement.

Got more questions? Find answers here: VAT In The UAE: Your Frequently Asked Questions

VAT in Saudi Arabia

Saudi Arabia is one of the countries that adopted the unified VAT agreement approved by the Gulf Cooperation Council countries in 2016 regarding the implementation of VAT , and committed to initially implementing VAT at a rate of 5%, in accordance with a royal decision amending of the Tax Law.  VAT rate has been raised to 15% on all goods and services subject to it, and Zakat, Tax and Customs Authority is responsible for managing and implementing VAT.

The Decision GCC VAT Agreement and its Implementation

• In Article (78) this agreement is approved by the GCC and ratified by the member states in accordance with their constitutional procedures and will be effective according to the following:
• The agreement shall enter into force following the deposit of the member state’s second instrument of ratification with the General Secretariat of the Council.
• Each country takes internal procedures to issue domestic law to put the provisions, policies and procedures of the Convention into effect.
• Each Member State is outside the scope of application of this Agreement until the date on which its domestic law enters into force.

GCC VAT Agreement Glossary

GCC VAT Agreement: A tax imposed on the import and supply of goods and services at the various stages of production and distribution in any member state of the Council.

Taxable person: A person who carries out an economic activity independently for the purpose of profit, provided that he is registered or obligated to register for tax purposes.

Tax Group: Two or more legal persons residing in a member state. And each member state has the right to treat a tax group as a taxable person, in accordance with its rules and conditions.

‌Exception from Paying Tax in Special Cases

Each Member State has the right to exclude the following categories from paying tax or allow them to recover the tax incurred when receiving goods and services. These categories include:

• Government agencies or institutions (identification subject to the Member State)
• Charitable organizations (according to the classification of the member state)
• Companies that are exempted under agreements or companies that host international events
• Citizens of the Member State if they build a residential house for private use
• Unregistered farmers and fishermen are taxed
• Provided that the period for keeping tax invoices, records and accounting documents shall not be less than five years from the end of the year. A taxable person in any member state of the agreement may claim the tax paid in another member state.

Member states have the right to exempt some sectors or subject them to tax at a zero percent rate in accordance with the conditions and controls they specify, but all the countries of the agreement agreed that this includes the sectors of education, health, real estate, and local transportation.

Each member state has the right to subject its oil, oil derivatives and gas sectors to zero tax, in accordance with its specific conditions and controls.

We at “VAT Registration UAE” specialize in providing VAT services in GCC countries. Do not hesitate to contact us to consult a tax expert.