The GCC VAT Convention can be defined as a single VAT agreement by the Gulf Cooperation Council (GCC) for Arab states. VaE and Saudi Arabia will be the first countries to introduce VAT to the GCC from January 2018, while other Gulf countries will have until the end of next year to implement the tax system. However, the implementation of the excise in the United Arab Emirates in the fourth quarter of 2017 is envisaged. That is why companies in the United Arab Emirates, Saudi Arabia and other Gulf countries are preparing to introduce the VAT system. The Single Agreement on VAT (VAT) of the Cooperation Council for Gulf Arab StatesThe Cooperation Council`s single VAT agreement for gulf Arab States was published by UM AL-QURA, number 4667, H1438/7/24. This agreement aims to define the uniform legal framework for the introduction of VAT in GCC countries, which is imposed on deliveries of goods and services. The kingdom agreed by royal decree (point m/51 of 5.05.1438). Countries also enjoy great flexibility in the treatment of certain other important sectors – government agencies, event organisers (under international agreements), farmers and fishermen who are not registered for VAT and citizens who build their homes. Countries have flexibility in applying VAT to these groups – they can either refund VAT or exclude them from paying taxes on deliveries delivered to them.
The United Arab Emirates has confirmed that it will only accept refunds, and only in the case of certain public bodies, qualified event organizers and citizens who build their own homes. However, deliveries to these agencies in the United Arab Emirates are taxed in accordance with normal VAT rules and VAT is payable. It is not clear what other countries will do, but there is a possibility of differential processing of deliveries to these facilities, which are entirely based on the status of the recipient – it is potentially quite complex. An august 2018 article in the U.S. daily Khaleej Times, the launch date was scheduled for January 2019. This was confirmed later when the Bahraini Parliament approved the VAT agreement in January 2019. The VAT agreements concluded under the GCC VAT agreement and excise duties are the basis of each country`s individual VAT and excise scheme. Each Member State adopts its own national VAT legislation, using agreed-upon principles as guidelines. The treaty is sometimes called a framework agreement, and it is a good name, it defines the “wire framework” for 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 is not a document that taxpayers can count on per se – you have to look at local implementing laws to develop the exact mechanics of VAT in each country.