GCC VAT Framework Agreement Summary Notes

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April 16, 2024

The GCC VAT framework agreement was released on the 3rd of May 2017. This is a 33-page document that outlines the outcomes from the resolution of the GGC supreme Council meeting which took place on the 9th - 10th December 2015 for the introduction of VAT in the GCC. The framework is not a document based on the VAT rules that the collective GCC states will implement but is more of a framework on which they will base their country-specific legislation. However, there will be aspects to the framework which is mandatory for all GCC states to implement.

The following information is the key points contained in the GCC Framework:

  • A business/organization is mandated to register for VAT once its revenue is above $100,000 within 12 months. If the revenue is half of the amount, then registration is optional
  • VAT will apply to supplies of Gas, Oil, Water, and Electricity
  • Place of supply can be deemed at the supplier's place of residence or the client's place of residence depending on the type of goods/services provided
  • The place of import of goods will be the country of the first point of entry
  • The date of tax due will be the following:
  • Date of when the good or service is supplied; or
  • Date of the tax invoice; or
  • Date the services are partially or fully received
  • The VAT rate will be at 5% unless it is exempt or zero-rated
  • Zero-rated supplies will include education, healthcare, real estate, and local transport
  • Other exemptions on VAT include farming, fishing, and companies hosting international forums
  • Intra-GCC and international transport will also be subject to zero-rated VAT
  • In certain cases where not all of the input tax incurred is for the provision of goods and services, then a proportion of the input tax can be recovered against the output tax.
  • There may be provisions where input tax incurred before registration may be claimed subject to conditions
  • Tax invoices must be issued for goods and services and records must be kept for 5 years.
  • Tourists may be able to claim a refund on VAT purchased in the GCC subject to conditions.

It should be noted that the Framework was originally released in Saudi Arabia and may not necessarily be relevant in the UAE, also it was released in the Arabic language and then translated into English so there may be a risk of translation errors. Professional advice should be taken before acting upon any of the recommendations.

More specifically in the UAE, there are two legislative documents to be released, the first one is the VAT procedures law which is the legal framework of the VAT and the second is the more detailed VAT law which is the legislation document with the detailed guidance.

We will be releasing more detailed articles and case studies once the final VAT law is released.

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