It has recently been announced that the Gulf Cooperation Council (GCC) has agreed that its member states will introduce VAT from 1 January 2018.
The members of the GCC include Bahrain, Kuwait, Oman, Qatar, Saudia Arabia and the United Arab Emirates.
The rate is initially set at 5%, and similar to most VAT systems there will be a range of exemptions. It is intended that certain foods will be exempt. Certain services, including education and healthcare, will also be exempt. With rapid growth in the region continuing, the impact on construction and the various world events taking place over the next few years, including the 2022 World Cup in Qatar needs to be fully considered by businesses.
Whilst the implementation date is 1 January 2018, there is a long-stop option which requires full implementation by 1 January 2019. It is expected that further information on the detail of the rules will be available by mid 2016.
As with any introduction of a new tax there is a systems challenge for corporates in terms of how they capture the correct information for reporting and invoicing. Certain GCC member countries rely on cheques and post-dated cheques as the main instruments for carrying out large corporate transactions in certain industries. Businesses will therefore need to fully understand the tax point rules and how to correctly book these transactions to ensure correct VAT reporting.
There are also a number of free zones in the GCC countries. The impact of the new VAT rules and the interaction with the existing free zones regulations will have to be considered by businesses.
Please contact Sean McGinness on +44(0)1962735350 for further information.
