GCC publishes VAT treaty
- 28 April 2017 | Richard Asquith
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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