Value-Added Tax In Gulf Cooperation Council And Its Rates
The Gulf Cooperation Council (GCC) is a provincial intergovernmental economic and political alliance consisting of all Arab states in the Persian Gulf, except for Iraq. Its member states are Saudi Arabia, United Arab Emirates, Bahrain, Kuwait, Oman, and Qatar. The GCC was established in 1981.
The main purpose of the GCC is to achieve unity among its members and to coordinate, preserve, and supplement their individual efforts to achieve economic, social, and cultural development and prosperity. The council has also worked towards implementing a unified system of taxation, which would be known as the Value Added Tax (VAT).
This article provides an overview of the Value Added Tax in the Gulf Cooperation Council and its rates.
What is Value Added Tax (VAT)?
The value-added tax (VAT) is a consumption tax levied on a product at each step of the supply chain, from manufacturing to the point of sale. The amount of VAT that the consumer pays is based on the value of the goods or services that they have purchased.
VAT in GCC was introduced on January 1, 2018 as a replacement for the GCC countries’ previous consumption tax system and as a way to boost government revenue and standardize tax systems across the region. The VAT rate in the GCC countries is currently 5%.
You can also read: Corporate income tax and other GCC nations
VAT rates in the GCC countries
The 0% VAT rate applies to services that are exported outside the Gulf Cooperation Council member states, the shipment of crude oil or natural gas, real estate, and other areas including health care and education.
The standard VAT rate in Saudi Arabia is 5% and was introduced in January 2018. Prior to the VAT, Saudi Arabia had a sales tax of 5%, which was levied on the sale of certain goods and services.
As of 2023, the VAT rate in Saudi Arabia is 15%. This is in line with the VAT rates in other GCC countries, such as the United Arab Emirates and Bahrain. If a person's total taxable supplies during a 12-month period surpass SAR 375,000, then that person is required to register for VAT. The VAT rate increase is part of the Saudi government's plans to boost revenue and reduce dependence on oil.
UAE (United Arab Emirates)
The United Arab Emirates (UAE) introduced value-added tax (VAT) on January 1, 2018 at a rate of 5%. This was a major tax reform in the UAE, as previously there was no VAT or other indirect tax in place. The UAE is one of the few countries in the world to have introduced VAT at such a low rate.
VAT is levied on the supply of goods and services in the UAE at a standard rate of 5%. There are, however, a few items that are exempt from VAT or are subject to 0% VAT. These include basic food items, healthcare, and education.
As of now, the compulsory VAT registration limit is AED 375,000 and the voluntary registration limit is AED 187,500.
You can also read: How Is Corporate Tax Different From Value Added Tax In UAE?
In Bahrain, from January 1, 2019 to December 31, 2021, the common VAT rate was 5%. The rate was raised to 10% on January 1, 2022:
- most sales of goods and services
- Imports of goods and services
There are a few supplies and services that are exempt from VAT, such as:
- Financial and insurance services
- Sales of residential property
- Healthcare and education services
In order for a business to be registered for VAT, it must meet certain criteria, such as making annual supplies exceeding the mandatory threshold of BHD 37,500. As of 2023, the VAT rate in Bahrain is 10%.
The Sultanate of Oman introduced VAT at a standard rate of 5% on January 1, 2021. The Ministry of Finance is the competent authority for the administration and enforcement of VAT in Oman.
VAT is levied on the supply of goods and services in Oman at the standard rate of 5%. However, there are a few exceptions where goods and services are taxed at a reduced rate of 3% or are exempt from VAT.
Some of the main services that are subject to VAT in Oman include:
- Banking and financial services
- Electricity and water
- Petroleum products
- Real estate
In order to be eligible to register for VAT in Oman, businesses must have an annual turnover of more than OMR 38,500.
Kuwait and Qatar
Tax directors and advisors do not anticipate VAT regimes being implemented in Kuwait and Qatar before 2024, as rising inflation and high oil prices boost tax revenues.
How can CDA help you with VAT tax registration?
If you are looking for expert guidance and support in VAT tax registration, CDA can help. Our team of experienced professionals has a deep understanding of tax laws and regulations and can provide personalized guidance tailored to your unique needs. With our help, you can navigate the complexities of VAT registration, minimize your tax liability, and avoid costly penalties.
Contact us today to know more about how we can help you set and achieve your financial goals!