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

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