Single Agreement on Value Added Tax (VAT) of the Cooperation Council for the Arab States of the GulfThe Single Agreement on VAT of the Cooperation Council for the Arab States of the Gulf was published by UM AL-QURA in its number 4667 of H1438/7/24. This agreement aims to define the single legal framework for the introduction of VAT in the GCC countries, which applies to the supply of goods and services. The Kingdom`s agreement was given by Royal Decree (point m/51 of H3/5/1438). The treaty is sometimes referred to as a framework agreement, and that`s a good name – it defines the „wireframe“ of a collaborative VAT system between GCC countries. It should be remembered, however, that this is a treaty and not a law, and is therefore essentially an agreement between countries. It`s not a document taxpayers can rely on per se – one has to comply with local implementing laws to find the exact mechanics of VAT in each country. At the time of the letter, only the Saudi VAT Bill (which is itself essentially a framework document with no details on what will be void or exempt in the contract) is available, but the details are beginning to appear. In the meantime, the Treaty provides important guidance on how we can expect the VAT system to work. The VAT and excise agreements concluded under the GCC agreement form the basis of each country`s individual VAT and excise mechanism. Each Member State adopts its own national VAT legislation, with jointly agreed principles based on guidelines. In a report published in August 2018 in the UAE daily Khaleej Times, the date of introduction was scheduled for January 2019. This was later confirmed, when the Bahraini parliament approved the VAT agreement for adoption in January 2019. A frequently asked question is whether the GCC VAT system is based on the MODEL OF THE EUROPEAN UNION or on the more modern systems in the new VAT countries (Singapore or New Zealand).

Well, you have to start with a look at the comparators, and the only comparison with a multi-country VAT system is the EU. That is why it has similarities with the EU VAT system. The similarities with the EU are mainly due to intra-company trade (and certain services) between businesses (B2B) and private consumers. The provisions on distance selling apply, so anyone who delivers goods above the VAT threshold to another country must register there. If you are familiar with the EU VAT system, the possibility of not collecting VAT on many B2B deliveries with which your customer is registered on turnover in another GCC country is very familiar. The GCC VAT Agreement can be defined as the Gulf Cooperation Council (GCC) Single VAT Agreement for the Arab States. The UAE and Saudi Arabia will be the first countries to introduce VAT into the GCC from January 2018, while other Gulf countries will have until the end of next year to implement the tax system. However, the excise duty is envisaged to be transposed in the United Arab Emirates in the fourth quarter of 2017. That`s why companies in the UAE, Saudi Arabia and other Gulf countries are preparing to introduce the VAT system. There is also considerable flexibility granted to countries in dealing with some other important sectors: government agencies, protest companies (under international agreements), farmers and fishermen who are not registered for VAT, as well as citizens who build their homes.

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