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GCC publishes VAT treaty

  • Apr 28, 2017 | Richard Asquith

GCC publishes VAT treaty

The Gulf Co-operation Council, which incorporates six Arab Gulf States, last week published its VAT Treaty, outlining the proposed January 2018 common VAT regime.  The six GCC states are: Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the UAE.

This framework agreement outlines the structure of the harmonized VAT regime across the six states, and will be used as a guide for the states to implement their own legislation locally.

Key features of GCC Framework Agreement

  • Not legally binding on states
  • Follows general OECD on a VAT system, including input and output VAT, time of taxation etc
  • Since the GCC will constitute a free trade zone, the Treaty follows the EU concepts of VAT exempt B2B intra-state supplies of goods and services, plus distance selling of goods to consumers
  • 5% standard VAT rate
  • Broader tax based compared to the EU, with limited use of reduced and nil-rated supplies of goods and services
  • Imports subject to VAT; exports are exempt
  • International travel, including between GCC states, is exempt from VAT. Domestic travel services will be standard VAT rated – although states may opt to exempt this
  • VAT derogations where states can choose to tax:
  • Health and medical supplies will be nil-rated for VAT, but are subject to final agreement
  • Some foodstuffs may be reduced or nil rated, but a list of such items is to be agreed between the states
  • States may choose to exempt financial services from VAT
  • Countries may introduce VAT groups to pool VAT reporting, but these will not apply between GCC states

VP Global Indirect Tax
Richard Asquith
VP Global Indirect Tax Richard Asquith
Richard Asquith is the former VP Global Indirect Tax at Avalara